Latio says these figures are consistent with recent warning signs.

But it add they are shocking considering that in Q1 2007 Latvia was Europe’s strongest performing housing market with house price rises of 44.23% during the year, according to Latvia’s Central Statistical Bureau.

Latio says the decline of house prices reflects several serious economic problems that have accumulated in Latvia including a deficit and inflation rises and an increase in the number of loans to residents. Long-term interest rates are also on their way up.

The Lats, pegged to the Euro since January 1, 2005, came under pressure in February in response to a Standard & Poor’s revision that put Latvia on negative watch forcing the Bank of Latvia had to intervene.

The Euribor interest rate on Euro variable rate loans jumped to 10% in June 2007, from 5% this January.

Obviously, this rise in interest rates has had a substantial effect. Legislative attempts have been made to cool the market through the banking system.

Despite all of this a large number of apartment projects continue to come on to the market. 60 developments have launched in the first five months of 2007 and the prices of individual flats are half their equivalents in London.