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Bulgaria At The Top Of Knight Frank 2007 Ranking Study

Croatia has also seen strong growth during the last year. The annual rate of 11.6 per cent growth at the end of Q4 2007 was marginally lower than the 12.1 per cent at the end of Q3, though this still appears to resemble something of a return to form for Croatia, after rates of house price inflation dipped to below 6 per cent towards the end of 2005.

Global house price inflation in the fourth quarter of 2007 stood at 8.2 per cent, compared to 9.7 per cent in Q4 2006, the latest Knight Frank’s report shows. Bulgaria tops the index as the country with the greatest annual price rise (33.7 per cent)

Bulgarian housing prices had a run of annual increases in excess of 30 per cent over the past couple of years, data of other real estate agencies showed, but growth is expected to slow down to 15 per cent in 2008. Bulgaria and Russia are the only European countries in the Knight Frank report to record an annual price gain of over 30 per cent in 2007.

In the Far East, Singapore with annual hike of 31.3 per cent and Hong Kong at 22.3 per cent both outperformed the market, as did China which has seen prices in some cities rise by over 20 per cent.

The Knight Frank Global House Price Index (KFGHPI) shows that while property prices in Europe and America appear to be suffering from the downturn in economic conditions, whereas prices in Asia and elsewhere, notably Singapore and Hong Kong, are performing very well.

The most outstanding feature in this index in Europe is Bulgaria’s continued strong performance against the astonishing reversal of the trends in the three Baltic countries.  Two of the three, Latvia and Estonia, saw prices go down by 7.1 per cent and 14.5 per cent, respectively, while Lithuania managed price growth of just under one per cent. It was only a year ago, when each of  the three Baltic states was a best performer in KFGHPI with 66.6 per cent, 23.8 per cent and 23 per cent annual growth rates, respectively. Uncertain employment conditions, rising interest rates and household indebtedness were all identified as the main reasons behind this turnaround.

As in the previous quarter Bulgaria has continued to see the strongest growth in house prices of the countries included in the KGGHPI, yet they remain relatively low compared with much of Central and Eastern Europe. Price growth has been greatest in the region around Vidin in the north-west, and Rousse in the north, close to the border with Romania. Prices in the capital Sofia also saw significant growth during 2007. In each case, prices increased by over 50 per cent.

Russia has been included in the KGGHPI for the first time. Price growth across the Russian Federation averaged 30 per cent in 2007. However, this figure hides marked regional disparities. The price of new-built flats in St Petersburg rose by over 75 per cent, and average growth for 2007 across the city was almost 50 per cent. Moscow saw slower rates of growth, with an annual average growth rate of 27.1 per cent.

Poland, another first-time entrant to the KGGHPI, rose over the course of the year by around 22 per cent, although the last two quarters saw falls in growth, of seven per cent and 2.3 per cent in Q3 and Q4, respectively, somewhat negating the 16 per cent growth seen in each of the previous two quarters.

The surprise performer in Europe was Iceland. Prices in the Reykjavнk region rose by almost 19 per cent during 2007. Price growth picked up towards the end of the year at a time when many countries across Europe were seeing the rate of house price inflation slowing. This has occurred despite interest rates of over 13 per cent, although the latest movements in interest rates have been downward. Increased access to credit, the increased availability of mortgage products, low unemployment and a booming economy are some of the factors that have driven house price growth, although rates of employment growth are expected to slow during 2008 which should act as a brake on house price inflation.

Croatia has also seen strong growth during the last year. The annual rate of 11.6 per cent growth at the end of Q4 2007 was marginally lower than the 12.1 per cent at the end of Q3, though this still appears to resemble something of a return to form for Croatia, after rates of house price inflation dipped to below 6 per cent  towards the end of 2005. The highest values per square metre for residential property are found in apartments in the capital Zagreb. The value of property on the Croatian coast is around 90 per cent of that in the capital.

In the remaining European countries, the strong performers are all Scandinavian. Sweden (with 10.6 per cent growth) has seen the strongest growth in Stockholm and the surrounding area, where residential property prices increased by around 15 per cent during 2007. Malmo also saw relatively strong growth, with price inflation over the course of the year just keeping pace with the national average. Growth in neighbouring Norway was slightly lower over the year, at just under eight per cent, and Finland saw growth of 5.3 per cent. The strongest growth in Finland has been seen in the regions within commuting distance of Helsinki. Improvements to the rail network to locations have boosted price inflation in locations such as Kanta-Hдme, where residential prices grew by 12.3 per cent in 2007. Conversely, although statistics on price growth for Denmark have not yet been made available, indications are that the market has slowed considerably and that some areas have seen falls in price growth.

Price growth in the UK slowed in the final quarter of 2007 to reach the lowest annual rate of growth since Q4 2005. Average price growth across the country has hidden the large regional disparities - price growth in Northern Ireland remained extremely strong with over 24 per cent growth during the course of the year, while the Yorkshire saw price growth of just three per cent. Growth has been constrained to some extent by declines in affordability affecting first-time buyers, and growth in 2008 was expected tol be slowed by consumer sentiment, adversely affected by turmoil in global financial markets.

Other European markets outside the UK have seen a slowdown in growth. Spain, despite the bad media coverage, is one of the stronger performers over recent months. Data released by the Bank of Spain indicated that residential property prices rose by almost five per cent during 2007. Some areas of the country saw extremely low rates of house price inflation over the course of the year - La Rioja and Madrid both saw rates of House Price Index below two per cent, contrasting sharply with the 8.1 per cent growth seen in Murcia, and the 7.7 per cent in Asturias. The Balearics also saw relatively strong growth with the annual rate to Q4 2007 just under seven per cent.