This article is more than 12 years old

This article is more than 12 years old

The property crash that began in the US is spreading across the globe, according to international estate agents Knight Frank, which said today that steep declines are now taking place across Europe and into Asia.

The country recording the sharpest fall is Latvia, where house prices have plummeted 24.1% over the past year. New Zealand, Denmark and Lithuania have all seen falling prices, along with Malta, Germany, Ireland, Estonia, Britain and the US.

Even countries where prices have not fallen are witnessing a rapid deceleration in price growth.

In South Africa the rate of house price inflation has collapsed from 15.5% this time last year to 3.8%, and is expected to be negative soon. In France, Spain and Greece price growth has halved and is running below 3.2%.

The only countries to have bucked the trend are Bulgaria, Slovakia, Cyprus and the Czech Republic, where house price growth has accelerated.

Last year's fastest growing market, Russia, which was seeing house price growth at an astonishing 53.7% in the second quarter of 2007, has dropped back to 26.5%.

Nick Barnes, head of international research at Knight Frank, said: "The index shows that global house price inflation is continuing to fall back, with much of continental Europe now seeing low or negative growth.

"Housing markets in countries such as Spain, Denmark, the UK and Ireland are all being severely challenged by the global credit squeeze."

Long-term decline

Globally, the rate of house price growth fell to 4.8% in the second quarter of 2008, down from 6.1% in the first quarter of the year.

Several countries are now entering their second year of house price declines. Among the worst hit is Germany, where prices were falling at a rate of 4.4% last year and 2.5% this year.

"There is less demand for owner-occupied property in Germany than in many other European countries and there is no shortage of supply," said Barnes.

In Spain, the Knight Frank index recorded a price rise of 2.4% annually, but it warned that falls are now almost inevitable.

"The well-publicised problems in Spain have not yet fed into house price statistics. So far, price falls have been concentrated in the coastal resorts and among new developments in the large cities," said Barnes.

"Spain looks likely to fall into recession later this year, and house sales fell steeply during June. The number of sales dropped by 34.2% in May and 29.6% in June, suggesting that wider price falls could be imminent."

But investors who bought second homes in Bulgaria have reason to feel bullish. Knight Frank said current annual price growth is 32.2%, only slightly lower than the 33.7% rate recorded in the first quarter.

Biggest fallers: Year-on-year house price change to Q2 2008

Latvia -24.1%

United States -16.8%

Estonia -16%

Lithuania -9.9%

Denmark -9.6%

Ireland -8.1%

UK -3.9%

Malta -2.7%

Germany -2.5%

New Zealand -2.2%