AFTER a year of accelerating house prices the brakes have come on, according to the Principality Building Society.

The only problem is that somebody forgot to tell Newport, which recorded an annual increase of 27.9 per cent taking the cost of the average home to 129,971.

The Principality's figures for the last quarter of 2004 recorded Welsh house price growth down to "just" 3.3%.

This brought the annualised increase down to 23.5%, a fall from the 31% recorded at the end of the third quarter.

In South East Wales, the figure was 22.5 per cent taking the cost of the average home from 114,263 to 139,971.

During 2004 Welsh house price inflation was approximately 10% higher than the UK average.

Principality chief executive Peter Griffiths said: "Over the past few months we have certainly witnessed a steadying housing market in Wales.

"This is partly because of seasonal trends but it is also evidence that prices were becoming over-inflated and needed to moderate to enable recent sharp increases to fall back to a more sustainable level."

The society believes that a combination of factors has enabled the brakes to be put onto the Welsh market.

These include the five increases in the Bank of England's base rate since November 2003, tax increases, rising retail prices and increasing energy costs.

Mr Griffiths said: "House price growth in Wales over the past two years has been exceedingly strong and has reflected the strength of the economy and the jobs market in Wales. This has also formed the basis of a very strong year for the society."

He is predicting a flat year for house prices in Wales in 2005. "On the macro level, we forecast house prices to rise around 4% in Wales over the year.

"However, on a micro level price growth will fluctuate between zero to 6%, dependent on which area of Wales the property is located.

"In the short term, the moderation in house prices will have little impact on first-time buyers.

"There is uncertainty about when wages will catch up with the recent house price increases, enabling first-time buyers to get a foot on the ladder.

"In the meantime new schemes will need to emerge over the coming year to assist first-time buyers to purchase a home.

"Demand for affordable housing is certainly there, but not at the price it's currently commanding."