The fun money may be migrating from holiday homes in the Spanish costas to those in Croatia, Turkey, Morocco and even more exotic locations, but these days if you're a serious property investor, the attention is clearly focused on central and eastern Europe.

With property prices in the United Kingdom having peaked for now, and rental yields depressed, the fast-growing former socialist states east of Vienna are where investors are looking to stake their claim in increasing numbers.

It is not about buying a place in the sun that you can use yourself and let to others, it's about workaday apartments in cities such as Warsaw, Bratislava, Prague and Budapest that can be let to the generation of urban professionals and office workers who are riding the wave of prosperity in Europe.

Last November saw one of the first exhibitions in London devoted to properties from the region, mainly featuring Berlin and Budapest. British agents are moving in. Savills has recently set up an investment arm offering properties in Budapest and Prague; French property specialist VEF has formed a new venture, Validus, to provide investment opportunities in eastern Europe; Knight Frank is turning the attention of its Moscow office from commercial to residential properties; and there is a small group of specialist operators targeted solely at this new market.

Vere Bruce-Jardyne, managing director of one such company, Letterstone, says: ‘Most people would prefer to invest in the UK, but yields and growth are hugely down. The key to the markets we are looking at is economic growth; we are looking for places that are affordable to local people now, but where there will probably be five times as many people wanting to buy in five years' time.' The strategy proposed by Letterstone is to invest in first-time-buyer apartments, let them to locals, and sell them on to locals after the five years.

Savills' new division, which also advises funds and investment groups wanting to build larger portfolios, has a slightly different strategy, focusing on longer-term capital returns from investment in high-end property let to wealthier locals or expatriates.

Henry Wilkes, who runs the new division, says: ‘Western Europe has seen an upwards convergence in property prices in recent years, and as these new countries join the euro, we expect them to follow the same trend.' He points out that the price for a two-bedroom apartment in Prague, rented by expat professionals, is currently only half that of a comparable property in Lisbon.

As well as fast-rising incomes, a number of other factors are fuelling the property boom in central Europe. One is the availability of mortgages: a few years ago, these were not available to most people in former communist countries, but banks are increasingly keen to lend to the burgeoning middle classes.

Another factor is the huge residual stock of sub-standard housing that is a legacy of the Cold War era. The panalaks were mass housing projects made of prefabricated concrete that were built as a solution to the housing shortage; many are now falling to pieces.

The new developments being offered to UK investors are of a similar standard to those available in the UK and other western countries, albeit a lot cheaper to build. Little wonder that there is no shortage of willing owners and tenants.

So far the focus has been on the capital cities of the most advanced countries joining the European Union - as it promises a high degree of economic stability - but it will surely widen as second cities and more countries come into the frame.

Today Prague, Budapest, Berlin, Bratislava, Warsaw; tomorrow Sofia, Zagreb, Bucharest, maybe even Istanbul.

There are usually three phases to the development of emerging property markets, says Wilkes; the first phase - where the pioneer investors go in - is the one that carries the biggest risk, but also offers the highest rewards.