AVERAGE house price increases in the North-East and North Yorkshire next year will outstrip rises in the affluent South for the first time in a decade, experts predicted last night.

With prices in some parts of the region already rising by more than 15 per cent, new figures show the North setting the pace next year.

Average house price growth in 2002 will reach a solid 3.4 per cent - but many parts of the region will see much higher increases, according to the latest Regional Housing Forecast.

The continued boom in the region's house prices will help narrow the gap that has existed between North and South since the Second World War.

Although housing will still be cheaper in the North, experts say canny buyers will enjoy continued growth while home owners in the South pay the price for hefty increases in the last few years that were unsustainable. And they warned that late entrants into the southern property market may even find themselves with negative equity over the next few years.

The report says: "Next year growth will be a steady 3.4 per cent, although with southern regions being hit harder by the slowing economic conditions, price growth will outstrip the expected UK average rise of 2.8 per cent for the first time in a decade."

In some parts of the South, property prices have actually fallen slightly since October. Latest figures show a drop of four per cent in less favoured parts of the South. That is in marked contrast to the North-East where all areas are showing strong growth.

Michael Poole, secretary of the North-East branch of the National Association of Estate Agents, said over the past 12 months, certain areas in the region had seen a boom in prices of up to 15 per cent.

Hot spots such as Acklam and Nunthorpe in Middlesbrough, the West End of Darlington, Yarm, near Stockton, and Northallerton, North Yorkshire, topped the list.

"Yarm as a centre has been pinpointed as one of the hottest spots in the whole of the UK," he said.

"But it has a lot going for it - good schools, good restaurants, nice walks. It's a nice place to live so there's a high desirability level and that fuels the prices."

He said that even through the traditionally lean Christmas period, the market had remained buoyant. "We would like to see an increase in stock coming on the market because selling it is not a problem," he said.

Mr Poole predicted that bargains of the future may be found in those areas nearest to last year's hot spots.

The survey, commissioned by Wavin Plastics, a leading supplier to the UK house building industry, also showed that the construction industry would be back on track as building projects delayed by the foot-and-mouth crisis and poor weather got under way.

The predictions are supported by major lenders and the Royal Institution of Chartered Surveyors (RICS).

Earlier this week, the Halifax, Britain's largest mortgage lender, warned of a slowdown in the South and the RICS recently named North Yorkshire as one of the biggest growth areas in the country.