Property prices surge in parts of the south

House prices in south-west England are rising at their fastest rate since the height of the last property boom 13 years ago, new figures show.

During the three months from June 30 to September 30, average house prices in the south-west jumped 7.5%, said the Halifax. Continuing rapid growth in the service sector, the regeneration of cities such as Bristol and an influx of non-locals into locations such as Exeter and Penzance are among the factors fuelling the surge in the region's market.

It is a similar story in East Anglia, according to Britain's biggest mortgage lender, which said the two regions have eclipsed London, where the rate of price growth has fallen back sharply.

The average price of a home in the south-west is now £112,528, and the annual rate of house price growth is running at 15.6%, compared with 9.8% for Britain as a whole. During the last quarter, both the south-west and East Anglia enjoyed their biggest price gains since the autumn of 1988.

Nationally, sluggish economic growth has begun to curb housing demand, but the Halifax said of the south-west: "The potential for a slowing of the economy has not begun to have an impact in the region where the positive effects of inward investment and redevelopment are still driving the market."

Phil O'Connor, the bank's regional general manager, said the regeneration of Bristol city centre, with many older run-down buildings knocked down or converted into hotels, office space and luxury city centre apartments, had made it "the place to live in the south-west".

The market is buoyant in Swindon, and Exeter and Penzance have seen an increase in the number of buyers from outside the area who are putting down large cash deposits.

In East Anglia property costs are up 6.8% over the past three months, with Norwich continuing to be a property "hot spot" and north Norfolk seeing high levels of demand.

By contrast, house price growth came to a halt in the north and the north-west over the same period, while prices fell in Northern Ireland. Greater London could only manage quarterly price growth of 3.2%.

Martin Ellis, Halifax group economist, said that nationally, house price growth had slowed, reflecting the general weakening in the overall pace of economic activity, though it was too early to say what impact the terrorist attacks would have on the property market.