UK house prices rose 0.6pc during May, but growth in the second half of the year will be limited by a cooling off in London, Hometrack has said.

A strong rise in prices across the capital of 1.2% is likely to be the last until at least the new year said Hometrack. Demand is expected to wane, thus bringing to an end a recent period of growth in sales and prices in the Capital.

Nationally, the average house price stands at £164,500, during May. In comparison to last year, prices were 1.6% higher in May, the highest annual increase since November 2004. Whilst the growth continues, Hometrack said the growing divide between London and the rest of the country meant it was dangerous to read too much into the headline rate of growth.

The Hometrack survey said that house prices increased by 1.2% in London over May and by 0.6% in the south-east and 0.5% in East Anglia.

Values remained the same in the east Midlands, while prices grew by 0.1% in three regions (Yorkshire and Humberside, the north and the north-west).

Richard Donnell, Hometrack’s director of research, said: “The London effect has been flattering the overall picture of a relatively buoyant housing market.

The reality is that house price growth remains limited across large parts of the country.This latest survey shows that outside London house prices remained static across two-thirds of all postcode areas.

The extent of house price growth across the capital is starting to turn down. Turmoil in the equity markets and talk of possible interest rates rises are likely to impact on buyer confidence in the months ahead whilst the World Cup will impact on activity levels over the summer.

With affordability levels already stretched we are likely to see much slower house price growth over the second half of the year and we expect average house prices to rise by just 3% over the whole of 2006.”