House price inflation hits 12-month high

House price inflation hits 12-month high

The figures, published today by the Department for Communities and Local Government, formerly the Office of the Deputy Prime Minister, showed that inflation had crept up from 5.1% in April to 5.6% on average across the UK.

The rate of price increases was greatest in London and the north-east, where inflation was above 7%.

These were also the regions with the great disparity in prices. The most expensive properties in the country are in London, where the average price was £279,418, while the average house in the north-east cost £139,175.

By contrast, house price indices published by the lenders Halifax and Nationwide seemed to indicate the end of a "mini property boom", as both reported a slowdown in inflation in May followed by a fall in prices in June.

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Howard Archer, economist at investment firm Global Insight said the rise in house price inflation reported by the DCLG did not "significantly undermine" evidence from the rest of the market that prices had lost momentum.

"It should be borne in mind that the DCLG data tend to provide lagging evidence on house prices, as the office calculates its index at the time when mortgages are completed," said Mr Archer.

"We expect house prices to settle back into an extended period of relatively modest rises," he added.

The Royal Institution of Chartered Surveyors also anticipated "modest rises" in prices for the rest of the year.

"RICS estate agents have reported that good trading conditions in May have spilled over into June despite the distraction of the World Cup, and this points to house prices continuing to show modest rises into the second half of 2006," said RICS chief economist Milan Khatri.