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Lithuania - top European hot spot in 2007

Estate agents Knight Frank have predicted that Lithuania will enjoy the highest capital growth in its residential property market in 2007...

This week leading estate agent Knight Frank has revealed its forecast for capital growth in residential property markets across Europe in 2007.  With 20% growth in prices predicted next year, Lithuania tops the list of European countries.  Fellow Baltic state Latvia shares second places with Slovenia which are both set for 17.5% property price inflation according to Knight Frank.

Product manager for property investment company E-Quity.com, Chris Davidson, commented: "Lithuania is receiving a high level of foreign investment due to its strategic location as a logistical and transportation hub between Western Europe and Russia.  As a result many infrastructure developments are underway and the economy is booming.  This is particularly so in the capital Vilnius which has a buoyant but undersupplied property market."

Although not technically part of Europe, Morocco was included in the survey, coming in fourth place with a 15% growth forecast.  Indeed, this month Commissioner for External Relations, Benita Ferrero-Waldner confirmed that the EU is considering giving Morocco an even more privileged status than the special relationship it has enjoyed since signing the Euro-Med Partnership in 1995.  Moroccan Prime Minister Driss Jettou has been quoted as predicting that his country will be a fully-fledged partner in the EU family in 10 years.

Eight European countries are set for 12.5% property price growth in 2007, according to Knight Frank - Croatia, Cyprus, Estonia, Malta, Poland, Romania, the Slovak Republic and Turkey.

In spite of concerns, the outlook is optimistic

Knight Frank report that currently price growth has slowed in most markets and there are concerns over the sustainability of price growth in the context of mounting household debt and increasing affordability issues.

But overall Europe's residential markets continue to experience solid growth and Knight Frank believe the underlying demographic, economic and financial fundamentals remain healthy, suggesting a hard landing is unlikely.  What's more, in some central and southern Europe markets, limited mortgage penetration and strong economic expansion suggest a potential for further boosts in demand, according to Knight Frank.

The estate agent warns that certain markets - such as parts of southern Spain and Dubai - will require caution as localised areas which continue to see substantial new development could risk possible oversupply if recent levels of construction are sustained.  But these cases will be the exceptions to the rule as most markets enjoy further capital growth, particularly marked in emerging markets where demand keeps pace or outstrips supply.

Overall, Knight Frank is upbeat about the prospects of European residential property in 2007.  The estate agents see no obvious major international shocks at this point in time and with a continuing broadly benign economic and interest rate environment likely, they predict that both buyer confidence and appetite will remain firm.

Other key trends

Other key trends highlighted by Knight Frank include:

• 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

To view the complete research, go to http://www.knightfrank.com/research/uk.aspx

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