The residential property market in Riga, Latvia is appreciating faster then anywhere else in the world, according to Knight Franks Global House Price Index.

The index reveals that average property prices in the Latvian capital appreciated by 45% during the second quarter of 2006. Bulgaria, came in second place (up 20%), while Denmark (up 15.4%) was in third.

Liam Bailey, Knight Franks Head of Residential Research, comments: "A levelling up situation is affecting all markets in the former Eastern Bloc - especially those which have joined the EU in recent years.

"Wage inflation, growing prosperity and access to less constrained mortgage finance have all contributed to rapidly rising prices.

"The same process has been seen in Bulgaria - with a classic combination of catch-up, speculation, second home interest and slow but sustained economic growth underpinning prices."

It is reported that much of the money piling into the Latvian and Bulgarian property markets is coming from British and Irish investors.