The city's housing price premium has narrowed this year as it lags the booming regions Prices rocketed in British regions but grew slowly in London in the past year, research shows. While fears persist of an interest rate rise which could halt the property boom, estate agents said the capital's housing market had begun to revive following a burst of buying activity in autumn. According to Britain's biggest mortgage lender, Halifax Bank, British residential prices rose 18.6 per cent in the 12 months to last month. Markets were most vibrant in Wales, the north of England, Yorkshire and Humberside where prices rose by a third in this period. Values rose 20 per cent in Scotland. In London, the slowest market, prices rose a relatively modest 8.6 per cent, Halifax Bank's third-quarter report for this year shows. The difference between the average British property price of #134,100 and those in London at GBP223,460 (HK$2.89 million) has shrunk by GBP5,600 from the first quarter of this year to the third quarter, Halifax reveals. Martin Ellis, chief economist at Halifax Bank, said: 'The recent rapid rises in house prices in the north have led to a modest reduction in the north-south property divide in the past six months. 'More favourable housing affordability and encouraging labour market trends in the north should cause the gap to narrow further in the coming few quarters.' A recent upsurge in buying activity in London could ensure the north-south divide does not narrow further. According to Hamptons International, property sales in the capital and the rest of southern England were a third higher last month than in September last year. Demand was rising faster than supply in the south last month, a turnaround from January when supply was rising rapidly and demand fell, the real-estate agency found. A recovering stock market, realistic pricing, continuing low interest rates and unemployment levels, plus positive media coverage meant house prices would remain stable, making it easier for vendors to sell, Hamptons September monthly survey said. 'There hasn't been a better time this year to be on the market,' Hamptons International director Mark Anderson said. It also considers the upturn in the south will spread to the rest of the country, bolstering the boom in these regions. However, speculation was rife that the Bank of England would raise interest rates, a move that would hit mortgage borrowers hard, analysts said. Fiona Sadek, research director at Knight Frank, said: 'If they do raise interest rates, then people with big mortgages will get stung, particularly in the buy-to-let market. Mortgages are cheap, but if rates rise they won't be cheap any more.' However, interest rates would remain unchanged for another six months because there was little reason to raise them, Ms Sadek said. British house prices would continue to rise in the longer term because developers were not building enough homes to keep up with demand, estate agency FPDSavills said. The agency found the number of new homes being built across the country had remained broadly static at 176,000 completions each year for the past decade. Fewer homes were completed in Britain per head of population than in the United States, Japan, France and Germany, it said. Ms Sadek said land banking by developers, landowners and the government, and the slow planning process, had restricted house construction. The number of first-time buyers entering the market has fallen recently. However, this would not have a detrimental effect on demand in the longer term. 'I don't think this is going to be a prolonged situation,' Ms Sadek said.