House prices on the overheated fringes of Europe have begun to turn down sharply, replicating the early phase of the sub-prime property slide in the United States.
Housing booms in Romania, Bulgaria, Croatia, and even Russia are all looking stretched to extremes.
Irish property has fallen for the past four months in a row as higher eurozone interest rates start to bite harder, while the speculative bubble in the Baltic states has burst.
House prices in the greater Riga region of Latvia fell 3.5pc in June, following a 1pc fall in May. Flats in the old city became more expensive than Berlin by early this year in a speculative frenzy, much of it with euro, Swiss franc, and yen mortgages that could prove disastrous if Latvia's currency is suddenly devalued - as may well happen, given the country's current account deficit has exploded to 26pc of GDP.
Similar booms in Romania, Bulgaria, Croatia, and even Russia are all looking stretched to extremes. Danske Bank has warned that much of Eastern Europe has been inflated by a "monster bubble" that recalls conditions in east Asia shortly before the crisis broke in 1997.
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Tuesday 28 August 2007
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