Global house price inflation continues to slow

Global house price inflation continues to slow, with annual growth standing at 4.8% during Q2 2008, down from 6.1% in the previous quarter, according to the Knight Frank Global House Price Index.

Lithuania, Denmark and New Zealand have joined the group of countries where house prices are now falling quickly.

Prices in Latvia continue to plummet, with values now 24.1% below the same time last year, the steepest drop in the index.

For the fourth consecutive quarter Bulgaria tops the index, with growth of 32.2% over the year.

Slovakia, Russia, the Czech Republic and Hong Kong all recorded strong annual growth of over 25%.

Nick Barnes, head of international research, Knight Frank, commented: “The Knight Frank Global House Price Index shows that global house price inflation is continuing to fall back, with much of continental Europe now seeing low or negative growth. Nevertheless, performance is very varied, with prices still rising rapidly in several locations in Asia and Eastern Europe.

“Bulgaria is at the head of this list, where values have grown at 32.3% over the past year, and have now risen by 68% over the past two years. Admittedly this occurred from a low base, but demand from international investors and domestic economic growth remain strong, although there are fears of oversupply, particularly in the resort locations. Strong performance in Slovakia and the Czech Republic is also driven by robust economic growth.

“The rapidly depreciating housing markets of the Baltic States – led by Latvia, where prices fell by 24.1% over the past year, demonstrate that rising inflation and mortgage costs are real risks for the emerging economies of Europe, particularly those that have seen high levels of investment activity over recent years. However, housing markets in countries such as Spain, Denmark, the UK and Ireland are all being severely challenged by the global credit squeeze.”