London house prices down 14% in 2008

Property prices in London have fallen by as much as 14 per cent during 2008, according to the latest research from haart estate agents.

However, it appears the situation is now returning to stability, with the average London house price falling by just 0.25 per cent in June.

Average property prices fell from £249,211 in May to £248,642 – suggesting the impact of the credit crunch may now be coming to an end.

"The Spicerhaart London index, which uses real-time information, is a true reflection of what is happening in the market at the moment," said Russell Jervis, managing director of haart.

"Our data shows that price corrections have already happened and the market is now starting to stabilise, as it is underpinned by some strong fundamentals, such as the rental market and the increase in interest from first time buyers."

While house prices have been falling, the rental market is strong, seeing a two per cent increase in rents between May and June, according to haart research.

"Investors are capitalising on the current market conditions. Cash-rich investors are buying properties at competitive prices and benefitting from increased yields, as demand for rental property continues to grow with potential buyers continuing to sit out of the market," continued Mr Jarvis.

The moderation in house prices along with the rise in rents and rental demand has also caused an increase in enquiries from first-time buyers to 19 per cent in June.

"The last ten years of house price growth has been unsustainable, and the current moderations will help ease the affordability constraints of first-time buyers, who should be encouraged by the relative stabilisation of house prices," explained Mr Jarvis.

"The reduction in house prices will help first time buyers make that first step on to the property ladder.

"However, the increase in enquiries is not necessarily translating into sales, due to financial constraints.

"The lack of finance is stopping potential buyers in their tracks, and could force the market to grind to a halt. To resolve this, lenders need to start relaxing the mandates for lending."

Chris O'Toole