HOUSE PRICE PANDEMIC

THE old economic adage that when America sneezes Europe catches a cold has never been more true than in present circumstances -- and it is applying also to much of the rest of the world. A report by the international property company Knight Frank yesterday showed the extent of what can probably be described as a pandemic. House prices are dropping everywhere and even in the few countries where that is not the case the rate of price inflation has been cut drastically. In a few places values are still on the increase for reasons that are not immediately clear - Bulgaria, Cyprus, the Czech Republic and Slovakia among them. In fast growing markets such as South Africa house price inflation has dropped from 15 to 4 per cent while in Russia the astonishing 54 per cent seen in 2007 has fallen back to an almost reasonable growth rate of 26 per cent.

But in the rest of the world where house prices are a key economic factor the best that can be hoped for is a stable market. Meanwhile in countries as varied as Denmark and New Zealand, Germany and Israel, Britain and Japan, the story is uniformly negative. Spain is something of a special case - according to the Knight Frank report price falls have been concentrated in coastal resorts and earlier this year the general market was holding up reasonably well.

But both May and June saw sales drop substantially by around 30 per cent and further falls are likely as the year progresses.