Regional price surge fails to stop housing slowdown

The housing market slowed in the first three months of the year as a surge in prices across the Midlands and Wales failed to offset a sharp brake in growth in London, government figures showed today.

The housing market slowed in the first three months of the year as a surge in prices across the Midlands and Wales failed to offset a sharp brake in growth in London, government figures showed today.

The annual rate of growth in house prices slowed to 19.7 per cent for the three months to March compared with 22.2 per cent in the final quarter of 2002, the Land Registry said.

Martin Ellis, chief economist at Halifax, said: "I think this is another sign that the market is slowing. This goes with other signs that house price inflation is easing and that the housing market has passed the peak of the boom."

Its figures, which are based on raw data from house purchase transactions, showed a regional divide opening up within England and Wales.

Five of the 11 fastest growing counties or towns were in Wales, with Pembrokeshire topping the table with a 42.5 per cent surge. Sharp rises in Luton and Leicester helped to push the East Midlands to the top of the regional list with a 27.7 per cent rise.

The South-west, Yorkshire and Humber and Wales all saw large year-on-year increases, with the cost of property rising by 26.1 per cent, 23.7 per cent and 23.6 per cent respectively. This compared with a 12 per cent increase in London, which only three months earlier had been rising at 19 per cent a year.

This pattern was highlighted with the borough-by-borough breakdown, which showed Islington in north London rose just 1.97 per cent over the last year. This was less than the rate of inflation, which meant homeowners saw the value of their property fall in real terms.

Six other London boroughs, including Kensington & Chelsea, saw growth below 10 per cent.

This echoes a recent report by Hometrack, a property website, showing that there was a clear dividing line running from the River Severn to the Wash. Every one of the 23 areas to suffer a fall in April was either in London, the South-east, South-west or East Anglia, it said.

Further evidence of the reversal of the traditional north-south divide came from the Land Registry's analysis of sales by price band. The number of homes worth between £1.5m and £1.75m dropped by 6 per cent compared with a year ago. But the number of sales of "mid-price" properties – between £200,000 and £500,000 – surged by almost 50 per cent.

Economists believe that the top end of the market has been hit by job losses in the City of London and cuts in bonuses paid to the remaining workers. Meanwhile areas that missed out on the price boom of the late 1990s are now seen as affordable and are attracting speculative interest from buy-to-let investors.

The most expensive place to buy a house remains Kensington & Chelsea, where the average home costs £645,261, followed by the City of Westminster at £424,953.

Blaenau Gwent in Wales remains the cheapest place to buy a home, with prices averaging £38,599, followed by Merthyr Tydfil, also in Wales, at £44,130.