THE year 2005 will be a bumper one for the commercial property and construction markets, according to the Royal Institution of Chartered Surveyors (RICS).

The RICS UK Economic Brief for December 2004 to January 2005 says buy-to-let landlords are refusing to panic, financial returns for property continue to out-perform other major asset classes and the Government is expecting a massive uplift in public sector construction next year, following underspending in 2004.

However, in the residential market, growing affordability constraints and uncertainty as to the direction of the housing market have been reflected in a slowdown in sales.

In the commercial property market, the occupier market appears to be bottoming out as demand has improved gradually through 2004 and a turnaround in activity within the office market has brought about stability in rents.

A steady picture of rising activity continues in the construction industry, which saw commercial building as the main source of growth in 2004, following a drop in output in 2003.

House building in both public and private sectors is still firm, according to RICS, but the housing market slowdown may weaken activity going forward and slowing public works activity has been evident for some time, although the Government says this is due to underspending in 2004.