The Halifax bank, a subsidary of Lloyds Banking Group (LSE: LLOY) has reported that house prices in London rose in the first quarter of 2011, unlike in other English regions where prices continued to drop. The differences in the housing markets between London and the rest of England have raised fears that the so-called ‘North-South divide’ between the more prosperous South-East of the country and the economically disadvantaged North is deepening.

However, estate agents from areas outside London have reported increased interest from buyers, with the sunny weather bringing out more potential property buyers. The Easter period is traditionally when the property-buying season starts and agents are hopeful that there will be a ‘ripple effect’ from London. Because London is the capital and by far the most populous area in the UK, trends in the housing market invariably originate from the capital.

On average, house prices in London remain at 15 percent lower than they were in 2007 when the market peaked, but in certain boroughs valuations have broken records. In 2010, house prices in London rose by 6.1 percent, and in the greater South-East area of England, prices rose by 5.5 percent. In the rest of the country, prices peaked in April 2010 after a period of price rises following the financial crisis.

A major factor in the strength of the London housing market as opposed to elsewhere in the country is the lower level of unemployment there, helping to support the demand for property. In addition, salaries continue to rise, helping to bring property within reach. City bonuses, still high in many cases although many have been deferred, have also helped the housing market in the capital, while overseas buyers are also finding London attractive. It was reported last week that one Ukranian buyer purchased a flat in the prestigious One Hyde Park development, for £136 million.

House prices in the South are now 65 percent higher on average than in the North, with prices having fallen consistently in Northern regions since 2006. Conversely, with the exception of East Anglia, prices in all Southern regions continued to rise.

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