The sunny south is no longer the hottest place to buy in Europe, according to the latest figures from the Royal Society of Chartered Accountants (RICS). It says that after several years of high growth in the Mediterranean regions fuelled by the second homes boom as well as strong economic growth, countries further north are starting to catch up.

Assessing the price growth performance of 18 European housing markets, RICS found that Denmark and Estonia now top the price inflation league, with growth rates of 22% and 28% respectively.

Spain (15%) and France (10%), the leaders in 2004, are now third and fifth, with Sweden coming in fourth, at 12%.

With its 10% inflation rate, France is now the only one of Europe’s big four major economies whose market remains above the this threshold. Germany and Italy’s markets both remained flat last year, while the UK, as has been widely documented, had a quiet 2005 although the last quarter picked up considerably.

Author of the report, Professor Michael Ball, said: ‘Northern Europe saw some of the strongest house price rises last year, so the centre of gravity of Europe’s house price inflation seems to be heading north and the thirst for cross-border European residential investment is unlikely to be quenched in 2006.’

Milan Khatri, RICS Chief Economist, added: ‘We expect the European house price boom to run into its eighth year in 2006, with the market supported by a clear upturn in economic activity and income levels? as mortgage interest rates are likely to remain at close to historically low levels, any talk of a real European housing market slowdown is premature.’