HOUSE prices in Gwent have increased by more than 25% in the last year, new figures show.

The value of an average home in South-East Wales rose by more than £1,500 per month for each of the last 12 months - despite predictions they would fall by the end of the year.

According to Principality Building Society's latest house-price survey (to the end of September 2003) released today the average house in the region increased in value during the last 12 months from £85,329 to £106,83 - a total increase of £21,502 (25.2%).

Principality chief executive Peter Griffiths said: "This is a startling statistic. Earlier this year our figures indicated that the rate of house-price increases might taper off as we neared the end of 2003. While we are witnessing some slower movement of prices towards the upper end of the market, the situation across Wales continues to be one of steady upward growth in values."

House prices in Newport have increased on average by 17.8% to £91,152, and experts predict they will increase further as the city develops.

They also say that although Newport's housing market is stable at the moment, it is set to experience a boom as new developments, including a city centre university campus and arts centre, make it an attractive and vibrant place to live.

Tracey Sergeant, Newport manager of estate agents Peter Alan, said: "At the moment in Newport things have stabilised and there are only certain areas where there's a high demand and it's pushing up prices in the other areas. Pill, especially, is booming. The turnaround there is really quick. The last time we sold a property in Pill it was gone within a day.

"There is so much investment in Newport at the moment that things are on the up. Now is the time to buy."

Torfaen is also experiencing a boom among first-time buyers attracted by lower-cost housing.

Ceri Hiscox, manager of Peter Alan estate agents Cwmbran branch, said demand for homes remains very strong.

"A result of Cwmbran's popularity has been a significant price rise in many sectors, which in turn has benefited towns and communities further up the Eastern Valley," he said.

"Areas around Pontypool and Blaenavon have seen much more activity among first-time buyers, in particular, who have been attracted to the excellent value of homes in these areas."