Estonia has experienced the sharpest annual rise in house prices of any country in the world in the first quarter of this year, according to estate agents Knight Frank.

Knight Frank's research showed that the Baltic state has seen house prices grow by 17 per cent compared to the first three months of last year.

In second and third place were Denmark and New Zealand which experienced annual house price rises of 16.1 per cent and 13.5 per cent respectively.

Languishing in the doldrums at the bottom of the table is Serbia-Macedonia, which has seen house prices fall 10.3 per cent during the last twelve months.

And faring nearly as badly are Hong Kong and Japan with annual falls of 6.6 per cent and 2.6 per cent respectively.

The case of Hong Kong highlights the fickle nature of housing markets.  This year's fall of 6.6 per cent came directly after Hong Kong property recorded annual growth of 23 per cent in early 2005.

The UK's current annual growth of 5.3 per cent puts it in 14th place, midway down the table.

A slowing global market

Knight Frank's Global House Price Index shows that globally, house prices were 6.1 per cent higher at the end of March compared to the same period 12 months earlier.

This figure represents a considerable slow down in the international property market which peaked in 2004 when prices were growing on average by 10.9 per cent per annum.

Liam Bailey, Knight Frank's head of residential research, said: "The most notable trend is that house price growth is slowing across the globe"

He continued: "The early boom in house prices was led by the UK and Ireland in the second half of the 1990s with Australia catching up in 2000. As the 2000s progressed, more and more countries saw house prices rise strongly, including the majority of the European Union, South Africa, and latterly the US and New Zealand."

Now Knight Frank are urging investors to look carefully for opportunities in the cooling global market.  Mr Bailey tips Germany and Eastern Europe as places likely to see house price growth in the near future.

"We believe that stronger than anticipated economic performance will lead to above average performance in Germany in 2007," he said. "The process of 'levelling up' in Eastern Europe will carry on apace over the next five years with average prices in most of these states coming close to the EU average."

The first of its kind

This index is the first serious attempt to analyse house price trends across the globe and covers 29 countries.

To compile the index, Knight Frank has used official national statistics or those from a respected national financial institution such as a large mortgage provider.

"Those familiar with the UK residential market will be surprised to learn that not every nationality finds house prices a subject for fascination," said Mr Bailey.   "This unfortunately means there is a resulting lack of data to assess market movements in many countries. Even tracking basic data on house prices within the European Union can be problematic."

For example, in the Baltic states of Lithuania, Latvia and Estonia, Knight Frank has used the results for the capital cities as a yardstick for the wider national market.

Annualised house price growth by country
Country	2006 Q1
Estonia	17.0%
Denmark	16.1%
New Zealand	13.5%
Bulgaria	12.5%
South Africa	12.1%
Spain	11.6%
Ireland	10.7%
US	10.7%
France	9.3%
Sweden	8.5%
Latvia	8.3%
Lithuania	8.0%
Greece	7.9%
Italy	7.2%
UK	5.3%
Canada	5.2%
Belgium	5.1%
Finland	4.7%
China	4.7%
Netherlands	4.0%
Singapore	3.8%
Australia	2.6%
Switzerland	2.3%
Portugal	2.1%
Austria	1.7%
Germany	0.2%
Japan	- 2.6%
Hong Kong	- 6.6%
Serbia-Macedonia	-10.3%
Source: Knight Frank