Property prices in Eastern Europe rise

Cheap property prices are rising faster in the healthy economies of eastern Europe than anywhere else in the world, according to a index just compiled and released by Knight Frank, the UK estate agency. UK and Europe property expert Andrew Stefanczyk explores the issue in his latest column.

However, Japan continues to battle against property price deflation of 2.7%, even as its central bank has started to raise the interest rates.
Prices are also falling in Hong Kong as a powerful boom has turned into bust.

Overall, the index shows global property price inflation running at 8.5% in the year to June, below the 12.3% in the year to June 2005 but sharper than the 6.1% inflation rate recorded in March.

The overall picture from the survey is one of growth, with house price inflation in the US falling from 14.1% a year earlier to 9.4%, that of France slipping from 15.3 to 9.4%, China from 8 to 5.8%, Italy from 11.2 to 5.2% and the UK from 6.1 to 4.8%.

"The most notable trend is that house price growth is continuing to slow right across the globe," said Liam Bailey, the head of residential research at Knight Frank. "Many commentators have been concerned that the boom in cheap property prices which has been seen in many countries would end in tears. However, in these markets price growth has begun to slow down."

In spite of this, property prices in Riga, the Latvian capital, surged by 45.3% in the year to June, following on from a rise of 73.5% in the preceding year, with growth also buoyant in Bulgaria and Estonia.

Mr Bailey attributed this trend to a equalising of prices across Europe, particularly in the former eastern bloc nations that have joined the European Union. "Wage inflation, the growing prosperity and access to less restricted mortgage finance have all contributed to rapidly rising prices," he said.

In Bulgaria, speculation and interest from foreign second home buyers have helped maintain house price inflation at 20.5%.

Knight Frank predicts that Slovenia and Slovakia will be the eastern European cheap property hot spots in the year ahead, while Moscow will rival London as the world's most expensive city within the next 5 years.

Property prices in Germany, where inflation is 0.5%, are also expected to see sustained growth as the economy continues to recover.

Visit www.investalist.co.uk for more information on properties in the UK.

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