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Eastern Europe sees best growth, says Knight Frank

The latest global index from Knight Frank shows that capital appreciation in Eastern Europe is out-performing the rest of the world.

Growth is slowing worldwide, though. While global property price inflation is running at 8.5% in the year to June (below the 12.3% in the year to June 2005), it is still better than the 6.1% inflation recorded at the end of the first quarter in March.

The report points out that house price inflation has fallen in many of the big markets (see below for the full top 30). Nevertheless, 18 out of the 30 countries highlighted saw growth and the pace of decrease has reassured observers that a crash has been avoided.

This point was made by Liam Bailey, head of residential research at Knight Frank, who said: "Many commentators have been concerned that the boom in house prices which has been seen in many countries would end in tears. However, in these markets price growth has begun to slow."

In contrast to the global slowdown, buoyant markets in the Baltics and other parts of Eastern Europe continue to rise. For example, prices in Riga, Latvia, have risen by 45.3% in the year to June (although this is a fall from 73.5% growth the year before). In spite of concerns about over-development on its coasts, speculation from foreign investors has contributed to house price inflation of 20.5% in

Bulgaria

.

Bailey attributes the growth in the bloc countries to a range of economic factors, such as 'wage inflation, growing prosperity and access to less constrained mortgage finance'. Based on official statistics or local survey data, Knight Frank predicts that Slovenia and Slovakia will perform well in the next six months, as will

Germany

.

The following results from Knight Frank Residential Research compare the annual percentage growth of each country from Q2 2005 with Q2 2006:

Latvia (Riga): 73.5/45.3
Bulgaria: 43.8/20.5
Denmark: 15.3/15.4
Belgium: 18.9/14.9
South Africa: 25.2/14.3
Estonia (Tallinn): 19.9/12.9
Sweden: 7.7/12.8
Canada : 9.5/11.8
Greece: 10.4/11.8
New Zealand: 13.4/10.6
US: 14.1/9.4
France: 15.3/9.4
Ireland: 10.1/9.4
Spain: 14.0/8.5
Lithuania (Vilnius): 21.7/7.0
Finland: 4.8/6.7
Norway: 9.1/6.4
China: 8.0/5.8
Singapore: 2.4/5.7
Italy: 11.2/5.2
Hungary: 1.3/4.9
UK: 6.1/4.8
Australia: 1.9/3.7
Switzerland: 0.8/3.4
Austria: 3.9/3.2
Netherlands: 4.4/2.0
Germany: 0.2/0.5
Hong Kong: 22.5/-2.4
Japan: -4.8/-2.7
Serbia (Belgrade): -14.8/-5.1

Source: Overseas Property Professional - OPP News