Overseas holiday homes to fall in value as properties flood the market

British owners of homes in Spain and Eastern Europe could see the value of their investments fall as a result of the credit crunch. Michael Ball, professor of real estate at Reading University, said that retreats across the Continent could fall in value as a glut of properties come on to the market after years of speculative buying.

Savills, the upmarket estate agents, said that the value of foreign homes owned by Britons has risen from £7bn in 1994 to £52bn today. In Spain, a crackdown on rogue developers and the share price collapse of many property companies has led to stagnation. Prices in Florida, which has also seen significant property investment from the UK, have fallen by a tenth.

Professor Ball said: "There has been a boom. The market has been driven by foreign investors., Now that is beginning to turn."

Ian Marcus, head of European real estate at Credit Suisse, said he believed there was a "large oversupply" of holiday homes in many popular European destinations.