Britain has lost its place at the top of Europe?s house price inflation league, the Royal Institution of Chartered Surveyors (RICS) has reported.
While the rest of Europe?s housing markets continued to surge over 2004, Britain slipped to third place, overtaken by Spain and France, which now occupies the top spot with a 15.5% annual percentage increase in house prices over 2004.
According to RICS? figures, the UK?s property market was the only one in Europe to falter during 2004, and the only one that had to endure significant interest rate rises, resulting in a 3% drop in house price inflation to 12%.
?Low interest rates have been the principal driver of rising house prices in many countries, despite some quite moderate economic performances. Any sustained increase in interest rates takes the steam out of markets, as seen in the UK over the last year,? said RICS? economist Milan Khatri.
The study points to a ?three speed? Europe, with France, Spain, the UK and Ireland?s property markets occupying the ?fast lane? with double-digit inflation figures, followed by a middle group of six countries, including Italy, Denmark and Portugal, with figures of around 5%. The bottom group, including Germany, the Netherlands and Greece, has a house price inflation figure somewhere between 0 and 0.2%, although the German and Austrian markets are forecast to pick up over coming months.
The report?s author, Michael Ball, added: ?The future of Europe?s housing markets is closely linked to interest rates. Some countries have clearly unsustainable house price growth rates, while other are still weak. What is interesting is that there is no sign that markets are converging.?
Strong housing markets are not unique to Europe, RICS said, as witnessed by considerable booms in both the USA and Australia in recent years. However, while US house price inflation reached double-digit figures for the first time in 25 years last year, Australian price rises have slowed due to rising interest rates.