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Global property slowdown continues, latest price index shows

Annual growth across the world now stands at 4.8% for the second quarter of 2008 compared with 6.1% in the same period last year, the Global House Price Index from international property consultants Knight Frank shows.

Prices are now falling in half the markets listed in the index. Much of continental Europe has low or negative growth but the overall picture is varied with prices still rising rapidly in several locations in Asia and Eastern Europe.

Lithuania, Denmark and New Zealand have joined the group of countries where house prices are now falling quickly. Prices in Latvia show the worst drop, plummeting 24.1%.

Bulgaria tops the index with growth of 32.3% over the year and Slovakia, Russia, the Czech Republic and Hong Kong all record strong annual growth of over 25%.

But the figures need to be examined fully to get a true picture of what is happening. For example although Bulgaria shows the biggest rise this is from a low starting base. 'Prices in Bulgaria have now risen by 68% over the past two years. Demand from international investors and domestic economic growth remains strong but there are fears of oversupply, particularly in the resort locations,' said Nick Barnes, head of international research at Knight Frank.

The strong performance in Slovakia and the Czech Republic is driven by robust economic growth according to the report. But the report warns that the Czech economy is likely to slow in the next few years. The Baltic States are suffering from rising inflation and mortgage costs.

Prospects for the UK 'are not optimistic' and the report predicts no price recovery until 2010 but low unemployment and few forced sales are good signs. Spain looks likely to fall into recession later this year, the report says.

In Asia Hong Kong is the most rapidly appreciating market and overall in China annual growth is 9.2%. Prices in Singapore are falling and the market is cooling in Indonesia. Australia is experiencing a downturn and there is pessimism in New Zealand where prices are falling.

The US has the second largest fall but there are signs of recovery in some cities, most notably Denver, Boston, and Dallas with Florida and California seeing falls on more than 12%. But next door in Canada prices rose by 1.8% and are now 4.8% higher than a year ago.

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