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SOUTH WEST WILL LEAD THE WAY IN THE RECOVERY, SAYS KING STURGE

Firm‘s head of research forecasts “false dawn” for property market prices next year 

The South West is set to emerge from recession stronger and faster than its regional rivals once the economic recovery gets underway next year, according to a leading property expert.

And Dr Angus McIntosh, partner and head of research at King Sturge, the region‘s largest firm of international property consultants, says that by 2011, only London will be growing at a faster rate.

“As the recession deepened this year, every UK region went heavily into negative economic territory,” he said.

“For the UK as a whole the figure was -4.6 per cent, with London and the West Midlands topping -5 per cent. The South West economy shrank at a rate of -4.4 per cent, and this position of relative strength will be maintained in 2010 when we enter positive territory once again.

“Next year the UK economy will grow by 0.9 per cent and the South West, by 1.0 per cent. In 2011, the region will again outperform the national average by one percentage point, at 2.4 per cent. Having seen the sharpest downturn, London will recover quickest and will actually be the only region to outperform the South West.

“There is a growing consensus that the recession will now not be as long as forecast; a repeat of the Depression of the 1930s has been averted and recovery may be sooner than predicted. The South West is the through the worst but it will be a long economic haul through to 2012, to get back to where we were a couple of years ago. “

After a year which has seen house prices rally in the South West following last year‘s fall of 15 per cent, Dr McIntosh warned the region could see another small drop of around 1 per cent next year, before house prices climb once more, by 4 per cent in 2011 and a further 6 per cent in 2012.

“The overall volume of house transactions is way down, so while we have seen prices bounce back this year, this has happened on far fewer sales than we were seeing in 2006-07,” he said.

“As with the wider economy, the bounce back in the South West will be stronger than most but there will be a false dawn in the housing market next year, when unemployment will continue rising and prices will fall again before they recover properly.

“This means a delayed start for headline schemes such as the St. Austell ‘eco town‘, and the Sherford and Cranbrook developments in Devon.”

Dr McIntosh also forecast that the South West economy‘s increasing reliance on sectors such as retail, catering and hotels, and financial and business services, would continue apace.

“The number of jobs in retail, catering and hotels, already the region‘s largest employer, will grow by another 36 per cent between now and 2016 to over 650,000.

“There will be an even greater percentage increase in financial and business services (43 per cent), while health and education will also grow, by 26 per cent.

“Agriculture will remain static in growth terms, employing around 70,000 people, while public administration and defence (-4 per cent) and manufacturing (-38 per cent) will continue to decline in size between now and 2016.

“The South West has diversified and become far more service-orientated over the past decade or so, and this process is set to continue in the years to come.”

Dr McIntosh also warned that the bounce back in commercial prime property values seen in the latter part of 2009 may go into reverse by 2011/12.

“It is not possible for capital values to go on rising, whilst rental values are falling. As with the stock market, commercial property markets are beginning to look too expensive.”

ENDS  2nd December 2009

For further information please contact Neil Fraser, Sturgess Van Damme, on 01275 349011 or email neil@sturgessvandamme.co.uk