House prices in England and Wales rose by 0.1% in January, according to Acadametrics, the research firm which compiles a house price index for the Financial Times .

This brings house price inflation on this index to 6.5% annually, down from 7.4% in December and 10.5% in August. London house prices fell by an average of 0.1% in January after a flat winter, but on an annualised basis, London homes still showed healthy growth of 14.5%.

‘House prices in England and Wales increased by just 0.1% in January, which makes three consecutive months of monthly growth either just above or just below zero – the lowest for over three years,’ said Peter Williams, chairman of Acadametrics. ‘Given the significance of London in terms of impact on the market as a whole and especially in the South, the weakening in the capital’s housing market is notable albeit from a very high base.’

Mr Williams described the outlook for 2008 as ‘challenging’, but noted that any reduction in prices must be seen in part as a correction following many months of high growth. ‘It would take a far more significant shift in prices than we have seen so far to raise the spectre of negative equity,’ he stated.

The overall data for London house prices mask huge differences between the performance in various boroughs. For example, in Kensington and Chelsea, house prices have appreciated in value by 29.6% over the last three months while the City of Westminster and borough of Hammersmith and Fulham recorded annualised growth rates of 25.7% and 22.4%.

Of the 33 London boroughs, seven have averaged annual growth rates of 20% or more while six have recorded rates of 10% or less, the report found.