Annual global house price inflation now stands at 4.8%, down from 6.1% in Q1 for 2008 according to the latest Knight Frank global house price index. Lithuania, Denmark and New Zealand have joined the group of countries where prices are falling quickly, while the Baltic states, particularly Latvia, are witnessing very seep falls.

However it’s better news for south eastern Europe, with Bulgaria topping the table for house price inflation, which now stands at 32.2% year-on-year. Slovakia, Russia, the Czech Republic, Hong Kong, Singapore, Cyprus and Colombia all recorded strong annual growth, says the report.

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In Europe, price falls in Denmark are the most pronounced, while Germany also saw annual falls of 2.5%. Prices in Spain continue to rise, Knight Frank says, although falls do look imminent in the context of slow sales and bad press while the UK was down 3.9%.

In the Asia Pacific region prices in Singapore showed annual growth of 16.3% although most recently there have been falls month on month in house price inflation, leaving Hong Kong as the most rapidly appreciating country in the region with growth of 25.1%.

Prices also continue to fall in the US, although there are signs of recovery in cities such as Denver, Boston, Charlotte and Dallas, the report states.

Nick Barnes, head of international research, Knight Frank, said: ‘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.’

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