House prices up 0.4% in June

House prices increased by 0.4% in June, the second successive monthly rise of less than 0.5%, according to the latest Halifax House Price Index.

Overall, house prices increased by 2.0% in 2007 Quarter 2, less than the 3.0% increase in 2007 Quarter 1 and well below the 4.2% rise in 2006 Quarter 4.

Northern Ireland is now the most expensive part of the UK outside London and the South East. In early 2005, Scotland was the only part of the UK with lower average house prices than Northern Ireland.

House prices increased in most regions during 2007 Q2. The biggest price rises were in Northern Ireland (8.5%) and Greater London (4.9%). There were house price falls in the South West (-0.4%), West Midlands (-1.1%) and Wales (-2.8%). These modest declines, however, should be seen in the context of the substantial price rises recorded in all three areas over the past five years: South West (63%), West Midlands (81%) and Wales (116%).

The average price in the North passed £150,000 for the first time in 2007 Q2, reaching £155,188. Scotland (£140,262) and Yorkshire & the Humber (£149,051) are the only parts of the UK where the average price remains below £150,000.

The increases in mortgage rates since last summer and recent negative real income growth are expected to cause annual house price inflation to slow over the coming months.

Solid economic fundamentals – underlined by economic growth above the long-term average pace and increasing employment during the past year - and an ongoing shortage of housing supply will continue to support house prices. GDP is confirmed to have grown at above its long-term average pace in the first quarter of 2007 with a quarterly 0.7% increase. The UK economy is expected to have achieved its 60th consecutive quarter of rising activity in 2007 Q2, extending the longest unbroken stretch on record.

Commenting, Martin Ellis, chief economist, said: "House prices increased by 0.4% in June, marking the second successive monthly rise of less than 0.5%. Overall, prices increased by 2.0% in 2007 Quarter 2, less than the 3.0% increase in 2007 Quarter 1 and well below the 4.2% rise in 2006 Quarter 4. These figures indicate that house price inflation is slowing.

The increases in mortgage rates and the persistence of negative real earnings growth in the early months of 2007 are expected to cause annual house price inflation to slow further over the coming months. Solid economic fundamentals and a shortage of housing supply will, nonetheless, continue to support house prices."