However, house prices increased by 4.5 per cent in the first half of 2006 with a 2.6 per cent rise during 2006 quarter two.
House prices increased in all regions during the second quarter with the exception of Wales. The biggest rises were in Scotland (5.7 per cent), South West (3.8 per cent) and East Anglia (3.5 per cent). The smallest increases were in North West (0.2 per cent) and North (0.9 per cent). Wales showed a slight fall (-0.8 per cent), reflecting the increasing affordability difficulties for buyers in the Principality.
The pick-up in house price inflation in London and the South East over the past year contributed to a slight increase in the ratio between prices in the south and north in 2006 Q2. This follows four years of almost continuous decline in the ratio, tentatively suggesting that the north/south divide is at, or slightly passed, its low point in the current cycle. The average property price in the south stood at 1.58 times the average in the north in 2006 Q2 compared with a peak of 2.19 times in 2002 Q2.
The level of activity appears to have moderated in recent months. The number of mortgage approvals to fund house purchase during March-May 2006 was down 4 per cent compared with the preceding three months after adjusting for seasonal factors. Property transactions in England and Wales fell for the second consecutive month in May on a seasonally adjusted basis.
Sound fundamentals, underpinned by a strengthening economy, high employment levels and low interest rates, will continue to support housing demand in the second half of 2006. The annual rate of house price inflation, however, is expected to ease, partly because the corresponding figures last year were strong. Pressure on householders' finances from utility bill and council tax rises, and speculation of higher interest rates, are also likely to moderate demand, causing house price inflation to decline.
Martin Ellis, chief economist at Halifax, said: "House prices fell by 1.2 per cent in June. Sound fundamentals, underpinned by a strengthening economy, high levels of employment and low interest rates, will continue to support housing demand over the second half of 2006, ensuring that the market remains in good health. The annual rate of house price inflation, however, is expected to ease, partly because the corresponding figures last year were strong. Pressure on householders' finances from utility bill and council tax rises, combined with speculation of higher interest rates, are also likely to constrain demand."
