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European house prices 'slowing or falling'

The European housing market is cooling - and Britons who own second homes abroad might find their loans becoming more expensive as a result.

According to the Royal Institution of Chartered Surveyors (Rics), either inflation in most countries has slowed markedly or the cost of property has fallen.

Interest rate policies from the European Central Bank (ECB) - which had doubled the rate from two to four per cent prior to the beginning of the credit crunch last summer - have been blamed for the property slowdown.

Since then, homeowners have been caught in a pincer effect - as conservative lenders have tightened up their cheap credit and the ECB has rejected calls to implement rate cuts due to their concerns about inflation.

These two factors have contributed to making second home ownership much more expensive now than it was previously.

Rics report author Professor Michael Ball said: "There are prospects for some house-price falls during 2008 but the scale of any housing market downturn is likely to be far less than the last downturn in the early 1990s.

"Slowing economies, and housing markets, need lower interest rates but higher inflation is against them."

Around 300,000 UK homeowners have a second home in another country, with properties in Spain and France both particularly popular.

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