Average UK house prices rose by 0.6% in July and are now 3.2% higher than this time last year, according to Hometrack.

Property price inflation has been driven primarily by London, but the market may be set to slow during the second half of 2006. This is because Hometrack reports that the number of new buyers registering with estate agents in July fell by 0.9%, the first fall this year. Furthermore, only 31% of the UK reported property price rises, compared to 42% in June.

Richard Donnell of Hometrack says: "The monthly Hometrack surveys continue to show that whilst there are concentrations of strong market activity and robust house price growth, the reality is that across two thirds of the country house prices remained unchanged.

This is largely a result of continuing affordability pressures in the markets away from southern England which experienced rapid high price growth between 2002 and 2004."