Residential landlords in the South East have been given a glimpse of how their property investments are performing following a research report on residential development by Knight Frank.

It showed that the South East housing market averaged 7 percent capital growth in 2007, outperforming the UK average (5 percent) as well as Greater London (4 percent).

The region’s strongest performing local authorities varied considerably in terms of location and character.

The traditionally affluent home county locations such as South Bucks and the Wealden area in East Sussex experienced growth in excess of 19 percent but similar levels of growth were achieved in coastal locations such as Adur (Shoreham-by-Sea) and Hastings, both the focus of significant regeneration. Six local authorities in the South East saw an increase in sales volumes in 2007; Wycombe, Bracknell Forest, Slough, Ashford, Crawley and Thanet.

All are areas either undergoing major regeneration, earmarked for significant new supply, or due to benefit from improved transport links.

However, the regional housing market has not been immune to the wider national and international economic downturn. According to the Land Registry, sales activity in the South East fell by 14 percent in 2007 and Knight Frank expects sales volumes to fall still further this year.

Liam Bailey, Knight Frank head of residential research, said: “In spite of this, housing demand in the South East continues to exceed supply. The Government’s household projections for the South East have recently been revised upwards from 34,400 to 35,800 per annum. Yet against this level of demand the region is currently only delivering around 27,500 new homes each year.

“This scenario, combined with the absence of both sharply rising interest rates and little evidence of a rapidly deteriorating employment market, has meant there are not a large number of forced sellers.

Consequently, we envisage that the South East will experience limited price falls in 2008, on a par with Greater London and still outperforming the wider UK market.

“The South East’s housing market continues to outperform the UK average essentially because of the region’s economic strength; strong productivity, high rates of employment and the fact median earnings are on average 10 percent higher than the national average, have contributed to an additional market driver - wealth.

“Aside from the economy, earnings and overall wealth generation, planned improvements to the region’s transport links such as the introduction of the high speed rail link between St Pancras, Ashford and the Kent coast and the new Hindhead tunnel on the A3, are likely to be an important driver of future growth.

 “Markets being targeted by large scale investment, regeneration, improved transport links and new employment opportunities will witness higher than average market activity. Shoreham-by-Sea, Chichester, Canterbury, the Kent coast and many rural locations between Tunbridge Wells and Ashford will spark investor interest.

“Whilst location is still extremely important when it comes to housing, in a cooling market, quality is also key. In addition to quality, the sustainable development of new homes has a significant part to play in the Government’s target of reducing the UK’s carbon footprint by 25 percent by 2020. For the growing number of eco-conscious consumers, a new home is increasingly the easiest and cheapest way to improve their energy efficiency.”

According to Government proposals, the South East is due to deliver at least 16percent (313,000) of its ambitious housebuilding target of 2 million new homes by 2016. All new homes need to meet environmental standards established in the new Code for Sustainable Homes which became mandatory on 1 May 2008. In addition, the Government is undertaking the creation of 10 Eco-towns, three of which are in the south east. Also, the Ashford Growth Area as well as the Growth Points of Maidstone, Basingstoke, Reigate and Banstead will together deliver 50,690 new homes, all with a strong eco-bias.