Estate agents Knight Frank have predicted that Lithuania will experience the highest capital growth of any European residential property market in 2007...

Estate agents Knight Frank have predicted that Lithuania will experience the highest capital growth of any European residential property market in 2007.  The estate agents predict that the Baltic country will see as 20% rise in property values next year.  At 17.5% its neighbour Latvia is only just in second place.

Slovenia is also tipped to experience 17.5% growth in residential property values and Morocco comes in fourth place with 15% property inflation forecast by Knight Frank.

European residential markets defy gloom mungers

Europe’s residential markets continue to experience solid growth in spite of concern about increasing affordability issues, mounting household debt and the sustainability of current price growth in a number of countries, reports Knight Frank in their recent report on the state of the European housing market.  Although price growth has slowed in most markets, they believe that a hard landing is unlikely, as underlying demographic, economic and financial fundamentals remain healthy.

Knight Frank point out that in some localised areas - predominantly in central and southern Europe - substantial new development is creating the risk of oversupply. Factors such as limited mortgage penetration and strong economic expansion point towards the potential for further rises in demand in these markets, however.

Knight Frank's key findings:

• The appetite for second homes, whether for personal use or for investment reasons, continues unabated, facilitated by ever increasing accessibility via new low cost air routes and the growth in supply of residential properties in both the mass and luxury sectors.
• A return to recognisable quality, often in the form of internationally branded resort schemes, offering a mix of residential and leisure uses as well as security and property management
• Increasing interest in alternative ownership options such as fractional and condominium ownership
• Growing buyer awareness of market trends and performance and a willingness to undertake more detailed research before committing to purchases

2007 European growth forecast

Looking ahead, Knight Frank are upbeat about prospects in 2007. With no obvious major international shocks visible on the horizon and a continuing broadly benign economic and interest rate environment likely, they predict that buyer confidence will remain firm.

Certain markets will require caution – such as parts of southern Spain and Dubai, for example.  In the main, however, Knight Frank predict further capital growth in most European markets. They believe this growth will be most apparent in the emerging markets where demand will keep pace or outstrip supply.

2007 Capital Value Growth Forecast (%)
2007
Lithuania	20.0
Latvia	17.5
Slovenia	17.5
Morocco	15.0
Croatia	12.5
Cyprus	12.5
Estonia	12.5
Malta	12.5
Poland	12.5
Romania	12.5
Slovak Republic	12.5
Turkey	12.5
Bosnia & Herzegovina	7.5
Bulgaria	7.5
Czech Republic	7.5
Denmark	7.5
France	7.5
Greece	7.5
Ireland	7.5
Montenegro	7.5
Spain	7.5
Sweden	7.5
Austria	2.5
Belgium	2.5
Finland	2.5
Germany	2.5
Hungary	2.5
Italy	2.5
Luxembourg	2.5
Macedonia	2.5
Netherlands	2.5
Portugal	2.5
Switzerland	2.5
SOURCE: Knight Frank