This is according to property investment specialists Assetz, which has just released its latest Property Investment Tracker showing quarterly growth in the American property market of just 1 per cent, the lowest since 1999.

Annual capital growth in the American property sector fell from 12.9 per cent in June to 9 per cent in September across the country, but it is possible that prices will drop on an annualised basis for the first time in decades - through 0 per cent into negative growth. House prices have stagnated and the American property market is saturated with houses, which may have a further negative impact on prices.

Stuart Law, Managing Director of Assetz, comments: "The US is definitely in the danger zone but we are not currently certain how severe the downturn will be. American holiday home buyers who are getting regular use out of their property are unlikely to be affected in the long term, but investors who were hoping to sell their property on quickly are no longer set to gain and are likely to face losses if they sell now."

So, should potential buyers walk away from the American property market, or is there still money to be made?

"My advice to them would be to take a 5-10 year view and focus on maximising letting potential", Law answers. "The American property rental market could benefit from any house price collapse and if the value of the dollar continues to tumble, international tourism will soar, providing great opportunity for rentals."

The dollar's fall in value highlights the benefit of buying with an overseas mortgage. The US dollar has fallen from $1.75 in April to $1.88 in September against the pound, which equates to about a 7 per cent loss of capital for British property investors who bought there for cash or remortgaged their UK home in order to buy, last year. However, those who took out an American mortgage will see the value of their debt falling by the same amount, reducing their loss to just 7 per cent of their sterling deposit.

Law continues, "The big question is whether the US will see the same soft landing that was seen in the UK. With far fewer restrictions on available land, I believe it is susceptible to negative growth as the effect of continuous rate rises over the last two years or so have caused a shock to the consumer, the effect of which is still to be fully realised."

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Article published on 2 October 2006