Europe's major property markets showed no signs of slowing down over the last 12 months as they returned greater than expected capital growth, according to new research.

2005 was a bumper year for European property and with interest rate rises from the European Central Bank (ECB) many experts predicted that those investing their cash abroad would fail to see the much-desired high returns of old.

However, major new research from the Royal Institution of Chartered Surveyors (Rics) shows that European markets, while marginally down on the previous year, still proved to be highly lucrative for those expanding their cross-border real estate portfolio.

Homes in Spain grew 11 per cent in value over the course of the year, four percentage points down on 2005, and French capital appreciated by seven per cent, down by the same amount on the 12 months before.

Although Germany's market remained stagnant, as it has done for the past few years, the Rics survey did state: "Signs are showing that the [German] housing market may begin to mirror the improving fortunes of the economy".

Denmark and Norway were the big winners, with price increases of 22 and 17 per cent respectively and the emerging markets of Lithuania, Estonia and Bulgaria also grew by between 15 and 20 per cent.

Top for price growth last year was Poland at 32 per cent, but investors have historically favoured properties in the more mature markets of France and Spain due to their inherent stability and guaranteed resale potential.

The report's author, professor Michael Ball of Reading University, said: "In the main, Europe's housing markets had another strong year. The long predicted soft-landings have yet to materialise, with European Central bank interest rate rises having little effect in the eurozone so far."

Milan Khatri, Rics chief economist, added: "Fears of a considerable house price slowdown in what are considered over-heated markets of the UK, Spain and Ireland, once again proved to be quite off the mark of actual developments.

"Rising income and employment levels have cushioned these and other markets across Europe from rising interest rates and the prospects for 2007 remain good as many economies have entered the year on a firm note."

One of the primary reasons cited by the survey, other than ongoing stable global economic growth, is that consumers and mortgage lenders have not balked at the rising interest rates, which rose by 1.5 per cent in the 2005-06 period, shrugging off the prospect of over-valuation.

As such, many lenders refused to raise their rates thus keeping the housing market buoyant.