Britons are fuelling a house price boom in Europe as thousands cash in on soaring UK prices to buy a second property abroad, research has shown.

During 2003 about 40 per cent of all new houses built on the Spanish Costas were purchased by British people with nearly two-thirds buying them as a holiday or retirement home, according to Barclays.

It said this demand contributed to a 21 per cent rise in house prices on the Costas and Balearic islands during the year, triple the traditional price growth of just six or seven per cent.

It added second-homers were having a similar impact on the French market. Prices in the Languedoc Roussillon area, which includes towns such as Montpellier and Nimes, soared by 28 per cent during 2003, nearly three times the national average of 11.3 per cent.

Barclays put the growth in buying abroad down to rising UK house prices and record levels of equity being released from properties.

During 2003 people unlocked around £57 billion from the value of their homes and Barclays said much of this was used to buy a property in Europe in cash.

The average price of a house in France is £81,000, while in Spain it is £87,000.

At the same time, the growth in low-cost airlines means people can travel to an increasing number of destinations cheaply, while historically low interest rates in France and Spain have kept mortgage repayments low for those needing a loan.

David Roberts, chief executive of Barclays Private Clients and International, said: "The current housing boom in the UK has given people access to huge chunks of equity from their homes, bringing a second home in Europe, where house prices are cheaper, within the reach of record numbers of British people.

"When you add into the equation cheaper air fares and the lowest European interest rates in a generation, it is easy to see how cash-rich Britons are driving up property prices."

Thursday July 15, 2004