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Whole world now affected by property downturn

The Knight Frank Global House Price Index, shows that annual global house price growth, excluding Dubai, slowed further to 3.8% in the third quarter of the year, down from 4.8% in Q2.

Dubai, a new entrant to the index continues to show growth but analysts point out that the recent downturn in the emirate is not yet showing in the published figures.

Lithuania, Canada, the UK and Norway saw the biggest falls in Q3, with prices falling by around 5% in just three months. The US remains at the bottom of the index and a further quarterly fall of 2.8% means prices are now almost 21% down from their peak.

But the UK is edging downwards and over half the countries in the index showed quarterly price falls, with one third now also showing annual price drops

'It is now clear that no part of the world is likely to escape the credit crunch as property prices start to fall in more and more parts of the globe. Even though strong growth in 2007 means two thirds of the index is still showing an annual increase, prices in more than half of the countries fell in the third quarter of this year,' said Nicholas Barnes, head of international research, Knight Frank.

'We expect that trend to continue with the vast majority of locations showing zero or negative quarterly growth by the end of the year,' he added.

He also pointed out that when the Q3 figures for Dubai are released growth is likely to have slowed substantially.

Russia and a handful of Eastern Europe countries still performed reasonably well in Q3, with annual price growth even increasing slightly in the Czech Republic. However, there are signs that some of the strongest performers of previous quarters are starting to weaken. Prices in Bulgaria, for example, grew by only 3% in Q3, half the rate seen in the previous quarter.

In some countries prices may have fallen enough to encourage bargain hunters. 'Although homeowners may beg to differ, the scale and speed of some of the falls is positive in a way because it means investors who are in a position to buy, are now sensing that some markets are offering relative value compared to pre-credit crunch conditions,' said Barnes.

'Against a backcloth of frustration with recent stock market performance and nagging doubts about segments of the banking sector, property appears to offer a relatively secure and tangible home for their money,' he added.