The average performance of the European economies has improved but the picture reported for individual European countries varies dramatically, with annual growth ranging from 26.1% in Latvia to -13.9% in Lithuania and -14.8% in Ireland, according to the latest Knight Frank Global House Price Index,

Liam Bailey, head of residential research at Knight Frank, said: “The performance of Latvia’s housing market in recent years has proved extremely volatile. In Q3 2009 Latvia was ranked at the bottom of our Index with house prices having fallen by 70% since the mid-2007 peak. Now Latvia leads our table. Following a combination of tax rises and austerity measures such as budget and wage cuts, industrial production has picked up with GDP reaching 2.7%. in Q3 2010. Residential demand has been further boosted by a new Latvian immigration law which came into force on 1st July, relaxing residency rules for foreign investors.

“Parallels have been drawn between Latvia and Ireland - in both cases the recession was borne out of a consumer-driven boom and bust and both governments have imposed strict fiscal tightening measures. In addition, neither country has been able to use its exports or devalue its currency to minimise the fallout from its economic turmoil. In Latvia house prices have started to climb again since Q3 2009. House prices in Ireland, by comparison, are still following a downward trend with price falls of 36% recorded to date, with declines of up to 50% recorded in Dublin. However, the latest results show the rate of decline is slowing with prices falling by 1.3% in the third quarter compared to 1.7% in the previous quarter.”