HOUSE prices continued to rocket in the North-East during 2004 but are set for a big slowdown next year, experts have warned.

A survey by the Nationwide showed that prices continued to rise fastest in parts of the North, with an average 22.8 per cent year-on-year rise between the last quarter of 2003 and the last of 2004.

It rated Derwentside, County Durham, as the number one house price hotspot in 2004.

Average house prices shot up by a massive 55 per cent, placing it ahead of any other local authority area in the country.

However, the Nationwide said that areas which had seen the fastest growth, such as the North, North-West, Yorkshire, Humberside and Wales, would experience the steepest deceleration in 2005 because affordability had become most stretched there.

While Derwentside was the hottest area in the country for price rise growth, Durham, Sedgefield and Newcastle all dropped out of the top ten "movers and shakers" list for house price increases after featuring last year.

Stephen Bennett, of estate agents NS Bennett and Associates, which has offices in Stanley and Consett, described Derwentside as an "undiscovered gem".

He said property buyers had been pushed out of more expensive areas such as Durham.

He said: "We have seen substantial increases in house prices in both the Stanley and Consett areas this year. Prices in Derwentside have been out of check with other parts of the North-East and other factors have been improved facilities and improved perception of the area as a whole."

The Nationwide said that house prices fell by an average of 0.2 per cent in December, with the average price of properties in the North being £120,859 and £133,494 in Yorkshire and Humberside.

Nationwide group economist Alex Bannister said this was the second monthly fall in the last three months.

He said: "Indications are that following the downward shift in activity and price growth during late 2004, the housing market may be beginning to stabilise."

The Nationwide believed the housing market was experiencing an "orderly slowdown" following five rises in interest rates to 4.75 per cent since last November.

Wages had risen slowly, and doubts over affordability had put off first-time buyers, who bought just 349,000 properties in 2004, Mr Bannister added.

In turn, sellers were increasingly dropping the asking price for their properties because they no longer expected prices to continue to rise rapidly.

A sharp downturn in prices could not be completely ruled out, even though the positive economic outlook meant this was unlikely.

The Nationwide predicted that, by the final quarter in 2005, house price growth of the North and Yorkshire Humberside would be at just two per cent compared with 23 per cent and 20 per cent respectively in the last quarter of this year.