DORSET'S homeowners are still sitting on a goldmine.

House prices in the county remain the highest in the South West, despite a fall in values over the past year. An average house will now set you back nearly £210,000, well above the UK average of £166,000.

Prices peaked in 2004, when the cost of an average home in Dorset reached a remarkable £220,000.

But David Slade, chairman of Bournemouth and District Estate Agents believed the market is on the turn and could grow as much as five per cent this year.

"We started the year on a positive note and the pressure on prices seems to be upwards rather than down," said Mr Slade.

"The only area where there has been any real measurable drop is perhaps apartments in Bournemouth and the first-time buyer market up to around £150,000, which probably peaked 12 months ago."

He added: "But the market has been relatively stable. It's not been like the previous crashes."

Rather than house prices dropping, he said it was the number of sales that had been falling.

"Last year, the volume of sales was probably the lowest for some years," said Mr Slade. "But that means there's a lot of pent-up demand which will hopefully increase sales this year."

Property specialist Colliers CRE also believed the housing market could be on the rise again, as the county attracts a big share of the 25,000 newcomers moving into the south-west every year.

Spokesman Ian Francis said: "Many thousands of new homes are required in the region to cope with the forecast growth of nearly 660,000 over the next 15 years."

But with more people needing homes and house prices set to take another turn upwards, affordable housing will become even more important.

A report in December 2004 found that Bournemouth was facing a huge lack of affordable housing.

At present, the council can demand that developers provide affordable housing where building schemes have 15 homes or more.

But Bournemouth council cabinet member Cllr Bill Mason said progress had been slow, with developers now tending to submit plans for schemes with only a few units.

"It is a problem. We seem to be seeing a lot of smaller, fragmented developments now," he said.