It's grim down South but Northerners still enjoying bullish housing market

A fall in average UK house prices last month masked a clear and widening divide between a boom in the North and a slump in the South, estate agents said today.

In a marked reversal of the trend in recent years, 21 of the 24 counties or towns reporting a rise were above a line from the Severn River to The Wash. And in a stark contrast, every one of the 23 areas to suffer a fall was either in London, the South-east, South-west or East Anglia.

Hometrack, which monitors prices at 4,000 estate agencies, said the average price of a home in England and Wales fell 0.1 per cent this month – the first drop since the aftermath of the 11 September terrorist attacks.

"This is the first clear sign that the property boom is over," said John Wriglesworth, Hometrack's housing economist. "Price rises seen in the North of the country conceal a very unsettled market in the South."

Hometrack said the housing market in the North was buoyant and showing sustained growth thanks to the affordability of prices. "The picture for the South is less bright, with counties that have seen the largest growth in the past now seeing continuing house prices falls," it said.

This echoes evidence from Halifax and Nationwide, the leading mortgage lenders, the Royal Institution of Chartered Surveyors and even speculators in the City of London. Bets placed with the spread-betting company IG Index show traders believe London prices will slump 7 per cent this year while northern regions will see a 10 per cent rise.

Mr Wriglesworth said: "The North-South divide is more marked than ever, and as sure as God made little apples, this trend will continue."

The boom in house prices since 1996 mainly benefited London and the Home Counties where prices rose as much as 40 per cent a year, putting them out of reach of a growing band of househunters and especially first-time buyers.

With the average house in London worth £220,000 – more than four times the average UK joint salary – buyers and speculators have started to look North. Hometrack's data show that in Guildford, Surrey, for example, the number of buyers slumped almost 20 per cent in the first three months of the year while the number of properties surged about 25 per cent. In Durham registered buyers have doubled in the past two months while sales have risen 80 per cent despite a small increase in available properties – driving prices up.

Analysts believe prices in London and the Home Counties will continue to come under pressure thanks to the stagnation on the stock market and redundancies in the City.