PROPERTY prices across the South West are expected to grow by 12.4 per cent by the end of 2009, according to Your mortgage, the independent consumer magazine.

The steepest increases are expected to be in Bournemouth and South Gloucestershire where house prices are predicted to grow by 14 per cent, closely followed at 13.7 per cent by Poole.

The figures are based on population trends, projected income levels, employment forecasts, interest rate projections, expected levels of housing stock and historic house prices from the Land Registry, among other data.

Andrew Stuart, editor in chief of Your Mortgage, says: "The latest house price projections for the South West show that the rampant house price increases in the South of the last few years are expected to ripple through and house prices in the area are beginning to catch up with the South East."

Of more immediate interest, despite recent interest rate rises property continues to perform well, according to Philip Gready, head of FPDSavills' Southern Region.

"Trading during the first six months of the year has been the busiest yet, with little sign of a tailing off," comments Mr Gready, who suggests this is largely due to the underlying strength in the investment market where bricks and mortar continue to be viewed as a more attractive home for funds than the stock Market and other sectors.

"The residential market has been bullish but there are now signs that interest rates are slowing down the speed of transactions. There is, however, no indication of a downturn in prices and the best properties are still competed for fiercely, particularly at the top end of the market where buyers are less mortgage-reliant.

"The new homes market remains firm, particularly for well designed houses in good village, town and suburban locations. The urban apartment market has been fuelled by buy-to-let investors and in many cases substantial portions of schemes have been bought by speculators, however we are expecting that this market will need to become less dependent on investors in the future."

"Last year the public sector accounted for a significant part of take-up but the private sector is gradually recovering and beginning to play a more important role as profits improve. The shortage of quality stock in many urban centres could well lead to rent increases.

"There is enormous demand for commercial investment, driving yields for prime property down to as low as 4.75 per cent (prime retail).

"There is no sign of this abating even in the face of rising interest rates which must, in time, call into question the yields being achieved, particularly for secondary-rated stock. This again reflects the high regard in which property is held by investors reconsidering their portfolios."