DESPITE the fact that the housing market in Wales is beginning to slow down, house prices in Newport rose by 37.3 per cent last year.

The figures released last week by the Principality Building Society also showed that the average house in Wales has increased in value during the last 12 months at more than 10 times the rate of inflation from £91,119 to £120,227.

Clearly, recent interest rate rises have yet to have an impact in the figures, despite the fact that the market in Wales does seem to be cooling.

The rate at which house prices across Wales are increasing is starting to slow down for the first time since January 2001.

But special factors in Newport - with more affordable housing than Cardiff and Bristol, attracting buyers from those areas and pushing prices up again - mean that the slow-down in this area may take longer than in other parts of Wales.

And that means many first-time buyers who grew up in the city will not be able to afford to buy a house here.

Peter Griffiths, Principality chief executive, said: "The current slowdown in house price growth is necessary.

"Price increases over the past year in many of Wales' hotspots were at more than 10 times the general level of inflation and this was clearly unsustainable.

"In the long-term the current slowdown will bring house prices more in line with inflation generally.

"This slow-down is good news for some, particularly those who are looking to enter the market for the first time."

But Mr Griffiths also highlighted a number of towns and cities gradually catching up with Cardiff.

The average cost of homes in Cardiff rose by 23.6 per cent to £155,288, while in Newport they rose by 37.3 per cent to £120,386.

Mair Stewart, branch manager for the Principality in Newport, said: "House prices in the area are not rising to the same degree as around six months ago and people seem to be more cautious in spending large sums of money on property with the interest rates rising, albeit slowly.

"The market has definitely slowed down. However, it is unlikely that Newport will slow at the same rate as Cardiff as we can offer more affordable housing coupled with proposed new investment since city status has been achieved.

"We are also seeing a migration from the Cardiff and Bristol areas due again to easy commuting distance and lower house prices.

"This migration will quite likely affect the house prices in the area if 'outside' buyers are willing to pay the asking prices without much negotiation."

Chris Jones, manager of the Home Office Estate Agents, Newport, said they were still busy but not as busy as six months earlier.

He said: "In relation to first-time buyers it has been a little bit quieter because I think they are more wary after the warnings about interest rates.

"Prices in Newport are still increasing steadily but over the past two years they have increased quite considerably."

Monmouthshire has recently been labelled the home ground of the super-rich - with a rise of 66 per cent in a year in those deemed to be wealthy and earning more than £60,000 in the Monmouth parliamentary constituency.

The area between Monmouth, Abergavenny and Usk has been been dubbed the 'golden triangle' by some in the property media.

But Rhys Waldron, manager at Waldrons Estate Agents, Abergavenny, said he felt the market was now cooling.

He said: "The last three years have been very busy and the first-time buyers' market is still quite strong but the prices in Abergavenny and Monmouthshire are very steep.

"Prices do seem to be levelling off here as well. I think all the money that was out there has been spent."

* Ben Caplan, 20, works as an admin assistant and is living at home with his parents in Caldicot as he looks around for his first house.

Ben would ideally like to live in the town where his family live but he is being forced out of the area by 'overwhelming' house prices.

He said: "The prices are awful and I can't see how I am going to get onto the ladder.

"I am probably going to have to buy outside Caldicot and move away from the area."

Ben said he would not want to go above £150,000 to spend on a house but houses in Caldicot are up to £200,000.

He said: "The prices are just overwhelming."