South-east 'to bear brunt of house price slowdown'

Southern England will bear the brunt of the slowdown in the housing market, the country's biggest mortgage lender warned yesterday.

Southern England will bear the brunt of the slowdown in the housing market, the country's biggest mortgage lender warned yesterday.

Halifax said its latest regional house price figures, published yesterday, showed the first signs of a slowdown in London and the South-east.

The price of the average home in the capital rose 1.6 per cent in the first three months of the year, the slowest growth since the summer of 2000. Prices in the South-east rose 1.9 per cent, the smallest rise since the end of 2000. This contrasted with a 7.9 per cent surge in Wales and a 7.3 per cent jump in the West Midlands, offering hopes of a narrowing in the long-running North-South divide.

Martin Ellis, Halifax group economist, said: "The rate of inflation eased in London and the South-east suggesting that the high level of house prices in relation to earnings in these regions is beginning to constrain demand, therefore curbing price growth.

"The south of England is expected to bear the brunt of the expected easing in UK house price growth later this year as more and more potential first-time buyers are priced out of the market, therefore blunting housing demand in this part of the country."

He added that lower bonuses for workers in the City of London and the impact of the two years of falling share prices were likely to contribute to a "marked slowdown" in price inflation in London.

"As a result there should be a modest narrowing in the gap in house prices between southern England and the rest of the UK."

The scale of the divide was highlighted by separate Halifax figures that showed the price of the average home in London had risen 16 per cent over the past 12 months and by 22 per cent in the West Country. Meanwhile prices have risen 8.3 per cent in Scotland and actually fallen 2.7 per cent in Northern Ireland.