“In 2007 perceptions about the North have altered,” says Steve Carr, the head of policy for English Partnerships, the Government's national regeneration agency. “Cities like Manchester and Sheffield have made huge strides, while other areas really struggle. It is no longer enough to think of the North as just one place.”

The latest figures from the Halifax show that the average asking price for property in the North is £158,636 - 68 per cent less than the South's £265,921 average. But everywhere across the North there is evidence of the splintering market. In Blackpool, estate agents can't give old guesthouses away: there's more than £55 million of unsold housing stock in the resort. In smartest Cheshire, though, according to Clive Hall, a local agent, “entry level for a four-bed, 1960s house is about £380,000 to £390,000”.

Over the Pennines in Yorkshire, Ryedale has average household earnings of £25,134 while the average house costs £171,976: this is the third-highest “affordability index” in Great Britain, after Kensington & Chelsea and north Cornwall, according to the Joseph Rowntree Foundation. But in Hull or Middlesbrough you can pick up a two-bedroom, end-of-terrace house for £35,000. As well as the increasing desirability of certain towns and suburbs - such as Altrincham in Greater Manchester (average price £338,293: up 22 per cent year on year) - the abiding theme of 2007 has been the wrong houses in the wrong places.

Terraced houses remain the most popular choice and have had phenomenal growth in the past ten years: a recent Halifax survey found that the price of a typical terraced house has risen by 239 per cent, compared with an average of 205 per cent over all properties.

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The London property market

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• Property prices grow at slowest rate in five months

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Lenders are getting more picky, yet property prices are refusing to fall far enough, fast enough

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• First proof of decline in housing market

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• Mortgage slowdown triggers house price fears

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End of house price boom is in sight

Societies saw an 8% drop in mortgage approvals last month compared with a year ago, the first such fall since 2005

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• Nationwide says slowdown may limit price rise

• House prices keep on rising

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Housing costs taking their toll

The question that always accompanies fresh data showing a fast-growing housing market is: are we headed for a crash?

Most analysts agree that the small-time investor has all but disappeared during the year, thanks to high interest rates and the arrival of a renter's market that is keeping yields down. This has put a particular damper on the centre of Leeds: the city has become the focus of “apartment oversupply”. “The problem in Leeds is not only that there are too many apartments in the city centre, but there are not enough new houses on the outskirts,” says Andrew Wells, at Allsop's auctioneers in the city.

The June floods presented a major challenge. House prices suffered, insurance premiums rocketed and in some places residents have still not moved back into their homes. You won't get an agent to admit on record that many affected properties are unsellable, but they clearly are — to the distress of their owners.

Forecast for 2008

The North will be less prone to “repercussions from the instability of the financial markets that will be felt more strongly in London and the South East”, according to Knight Frank. In affluent spots in Cheshire, the Wirral, and in the “Golden Triangle” between Harrogate, north Leeds and York, prices are levelling off, but the combination of the ease of commuting to regional centres and London, good schools and an attractive stock of period properties should protect these comfortable areas.

The fear in the North is that regeneration schemes in less-favoured areas will be curbed by a retraction of public and private funding. This would dent investor and consumer confidence further; almost everywhere outside of central Manchester, rental returns are stagnating. In Doncaster, Rotherham and Barnsley, terraced houses go for £300 a month, which won't cover a buy-to-let mortgage for much longer.

It is, however, Gordon Brown's “hard-working families” who stand to suffer most acutely. One major reason for the disparity between North and South house prices is affordability. Average salaries across the North rarely top £25,000 — and this figure masks millions on the minimum wage in retail and service industries.

The forecast is certainly for rough seas in many northern areas, but even that is good news for some. “Best market in six years,” Brendan Flood, managing director of Manchester developers Modus Properties, told a recent North West business breakfast. “With the institutions out of the market and caution creeping in, there is opportunity - more so than for six or seven years - if you're entrepreneurial. In 2008 you'll be able to pick up undervalued prime property because a lot of owners are over-exposed and need the money.”

Winners

Wetherby: record price growth, thanks to the proximity of the A1 and the variety of properties.

Ilkley: “Harrogate for beginners” is a favoured spot for affluent Leeds commuters.

Altrincham: trendy shops and restaurants, Urban Splash at the Budenberg Haus-Projekte, and the Manchester tram transformed the town.

Losers

Hull: the promised property boom hasn't taken off, and the floods didn't help.

Middlesbrough: voted the “Worst Place to Live in the UK” by Location, Location, Location on Channel 4 and criticised by Wayne Hemingway for “buy-to-leave” blight.

Bradford: sluggish regeneration took a blow when a Heritage Lottery bid for £24.5 million for a city centre park failed in November.

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