A town ranked as one of the most poorest in the UK is one of the country's top ten property hotspots.

Hastings is in the top 40 most deprived areas in the Government's deprivation index for 2004.

It has high unemployment and deep-seated social problems caused by poverty, drug addiction and homelessness.

But it has secured third place in the latest Halifax House Price Index after the cost of homes soared by 44 per cent in a year.

Merthyr Tydfil, in south Wales, recorded the biggest price increase at 53 per cent, followed by Bingley, in West Yorkshire, with 46 per cent.

While prices are booming in Hastings, East Sussex recorded one of the country's lowest rises, just seven per cent, while West Sussex was only marginally better at eight per cent.

Hastings was recently awarded £15 million from Government ministers to construct 677 homes and a range of community facilities.

The town has already received £38 million from Whitehall to revive its prosperity through education, improved transport links, high-speed internet communication, new homes and jobs.

Redevelopment of brownfield land at Hastings station and west Marina will provide about 900 homes and a new £9 million railway station has just been opened.

Estate agents believe Hastings has become attractive to people priced out of the London and Brighton property markets.

Lynn Pepper, a sales negotiator at Marlans estate agents in London Road Business Park, St Leonards, said: "Money has also been coming in to the town for redevelopment and things have been picking up.

"Hastings has not been looked at in the same light as places like Brighton and Hove or Tunbridge Wells but it seems to be doing well for itself.

"A couple of years ago we would have sold a two-bedroom flat for £95,000 but now they are more likely to go for around £110,000."

Rod Rodrigues, who owns Grindle and Co in Havelock Road, Hastings, said although prices had settled recently he expected them to go up again once transport links had been improved.

He said: "If the town gets a high speed rail link to London then that will attract more people to the area and will help give the place a boost. A good road link will also help.

"It is looking good for the town. Money is being poured in and we are seeing a lot of improvements.

"Even though prices have gone up we are still not as expensive as places like Eastbourne and Brighton and Hove.

"It means people who can't afford to go there are coming out. It is a sign Hastings is changing its image."

The latest results show the North-South house price divide is continuing to narrow with Hastings the only South-East town to feature in the top ten while nine of the ten counties recording the smallest increases were in the South.

Martin Ellis, the Halifax's chief economist, said: "Areas outside southern England have seen the strongest house price rises over the past year with parts of Wales, Scotland and northern England experiencing particularly buoyant conditions.

"The much stronger house price rises in northern Britain during the last three years have resulted in a significant narrowing in the North-South house price divide.

"Whilst prices continue to rise more rapidly in the North, there are increasing signs that house price inflation here is slowing as first-time buyers face similar difficulties to those in the South in buying a home, and as the effects of the recent series of interest rate rises bite.

"We expect this trend to continue over the coming months, with prices slowing most markedly in the North, contributing to slower UK house price inflation."