International Monetary Fund has warned.

The result may be a violent reaction across the globe if prices slump and an economic downturn emerges, the Washington, D.C.-based organization explained in its recently-released bi-annual Financial Stability Report.

The warning comes after U.S. homebuilding suffered its biggest slump in a decade with unsold houses reaching record numbers.

The “unexpected resilience” of global growth in recent years has led many investors to become complacent, the IMF warned. As a result, “international financial markets could undergo more severe corrections.”

Among other looming dangers are the “intensification of inflation” and a “disorderly” slide in the dollar.

Countries such as Britain have thus far seen only “limited” deceleration in house prices, despite higher interest rates, the IMF said.

That was confirmed by a government report that showed British property prices rose 6pc in July, the fastest pace in 14 months.

Copyright 2006, Daily Mail, London