Demand continues to exceed supply in the South East of England, despite the slowing market, says a new report from Knight Frank. The area experienced the greatest overall price growth last year, outperforming Greater London and the UK as a whole, the report found. The South East averaged 7% capital growth in 2007, a significant difference from the UK average of 5% and the Greater London average of 4%.

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The traditionally affluent areas of South Bucks and the Wealden area in East Sussex experienced growth as high as 19% overall, with similar levels achieved in coastal locations such as Adur and Hastings, although activity had fallen by the end of the year according to the Land Registry.

Head of Residential Research at Knight Frank Liam Bailey said: ‘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% 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.’

Looking ahead, the report expects slight price falls overall for the South East, as with Greater London: ‘Sharply lower sales activity, a tightening mortgage market and wavering confidence levels have led to an environment in which premiums are now a rarity, and liquidity is proving key,’ it concludes.

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