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Last Updated: Wednesday, 6 October, 2004, 08:16 GMT 09:16 UK
House prices show renewed vigour
UK house prices rose by 1.4% in September from August, says Halifax, the UK's biggest mortgage lender.

This reversed the previous month's small fall and casts doubt on whether the housing market is cooling.

The bank said the surge in prices was not out of the ordinary for the time of year and that the market had lost some momentum.

Meanwhile, the Joseph Rowntree Foundation has found house prices are five times average wages in some areas.

Its survey of house prices in England found the biggest affordability gaps in the South West and London, though picturesque rural hotspots were also way beyond the reach of locals.

Interest rates

Annual house price inflation is running at 20.5% and the average price of a home stands at more than 161,000, according to Halifax.

A barrage of recent surveys have indicated that five rises in UK interest rates since November have had their desired impact of helping to curb soaring UK house price inflation.

Last week's September survey by the rival Nationwide building society house prices rose 0.2% last month, compared to 0.1% in August.

Halifax chief economist Martin Ellis said that the view that the UK housing market was still cooling still held water.

"Despite the bounce back in September, the increase in prices during the third quarter was the smallest since the first quarter of 2001."

On Wednesday, the Bank of England's Monetary Policy Committee begins a two-day meeting to decide on the next move for UK interest rates.

Some city analysts have been suggesting that rates may have peaked at 4.75%.

Affordability squeeze

The Halifax house price figures coincided with the publication of a study tracking how far house prices exceed average wages, issued by the Joseph Rowntree Foundation (JRF).

It found that potential home buyers face the widest affordability gaps in South West England and London.

In these regions, small homes are changing hands for between five and six times average household incomes.

JRF also found similar affordability gaps in particularly picturesque rural areas, such as the Derbyshire Dales.

To solve the problem, JRF wants the government to promote new home building across England, not just in South East.

The research was based on households with wage-earners aged between 20 and 39 in England, and on the price of a modest two or three-bedroom home in the last three months of 2003.

Overall, five of the 10 least affordable areas of England were in the South West.

West Somerset turned out to have the biggest affordability gap. The area is popular with buyers of second homes and weekend cottages, a trend that has contributed to house prices 6.8 times average local salaries.

Similarly, houses in picturesque spots - such as the Derbyshire Dales, Alnwick in Northumberland and South Lakeland in the North West - are fetching more than five times average household incomes.

The government is embarking upon a huge house building programme to alleviate shortages of affordable property in South East England.

There are issues about attractive rural areas being the affordability hotspots
Professor Steve Wilcox

But the report's author questioned whether new building was being targeted to where it is needed most.

"There's the question of whether the government is putting money in the right places," said Professor Steve Wilcox, who wrote the report.

"There are issues about attractive rural areas being the affordability hotspots."

Costly capital

Homes in the South West have become less affordable in recent times, relative to property in London and the South East, Prof Wilcox added.

But home buyers struggle to afford homes in London too.

In London, two or three-bedroom homes sell for nearly five times average household income.

In two London boroughs, Westminster and Brent, the average house price to incomes ratio is more than six to one.

At the other end of the scale, the North East was the most affordable part of the country in which to buy a home. There, house prices were 3.19 times average incomes.

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