The housing market is set to slow down next year but there will not be a widespread fall in property prices, according the an estate agent's group.

Bradford & Bingley agents said house prices will continue to rise during 2002 but at a slower rate than this year, increasing by about three per cent to five per cent.

This more modest increase compares to gains of around 10 per cent this year as the cheapest mortgages for more than 40 years fuelled an already buoyant market.

But the group added that, despite a slowdown in the rate of price increases, it was not anticipating a fall in house values.

Peter Barrett, managing director at Bradford & Bingley, said: "We are confident that we will not see a widespread falling back of value.

"In fact, with sellers remaining realistic about asking prices, our view is that it remains a good time to enter the housing market."

The group is also predicting that there will be a number of property hot-spots around the country, with Darlington leading the way in the North of England and Chester seeing high increases in the North West.

In East Anglia, properties in Ely are tipped to see large gains in prices, while Southsea, near Portsmouth, looks set to be one of top locations in southern England.

In the West Country the group is predicting properties in St Austell will see good gains as jobs created by the Eden Project boost demand for housing in the area, while in Scotland the Isle of Bute on the west coast, and East Neuk of Fife look set to be popular with people wanting to buy second homes.

During 2001 the group reported a "significant increase" in people buying property to rent out, with many seeing it as a safer option than shares while stock markets remained volatile.

B&B said the property market "took a hit" in the immediate aftermath of the September 11 terrorist attacks, though within two months it had bounced back.

But the group said sales volumes were held back by a continued shortage of properties.