Double-digit percentage increases in property values are expected in 2006 following a strong performance last year, according to property agent Christie & Co.

In 2005, the sale values of hotels rose by a staggering 10.8%, while the restaurant and pub sector saw more modest rises of 4.7% and 5.2% respectively.

At the company's Business Outlook 2006 launch in London last week, Christie's managing director, Chris Day, said that while increases in fuel costs and energy would continue to have an effect on the market, sustained economic growth would stimulate the hospitality sector.

He put the rise in the hotel sector down to "active and aggressive interest from private equity, aggressive bank lending and strategic property company and operational partnerships".

Day forecast continued demand for hotels this year, improved trading performances and renewed growth in the lifestyle area. In the pub sector, he forecast no let-up in mergers and predicted that the shortage of freehouses would lead to increased demand for leaseholds.

The introduction of smoking legislation would place properties with outside space at a premium, while the introduction of disorder zones in town centres could lead to further realignment and consolidation in the high streets.

The restaurant sector would see increased interest in upmarket burger offerings and East Asian-style eateries, he said, and more conversions of pub properties into gastropubs.

By Emily Manson