London house price slump continues

Thursday, 31 July 2008 12:00 AM

Prices in the prime central London property market declined for the third consecutive month during July, according to the latest study from Knight Frank.

The estate agent recorded a 1.6 per cent fall in average prices over the month, following dips of 1.7 and 1.5 per cent during June and May respectively.

As a result annual growth - while remaining positive- has slowed dramatically.

While during July 2007 house prices in the capital were increasing in price at a phenomenal rate of 36.4 per cent annually, this is now slowed to just 1.8 per cent.

Even given these falls the London market is still outperforming the majority of the country, with Nationwide today reporting prices across the country have fallen 8.1 per cent over the last year.

According to Knight Frank, sales transactions have also fallen 50 per cent when compared with the same period last year, with properties presently achieving just 95 per cent of their asking price.

Only the super-prime market remains unaffected by the liquidity crisis, with properties valued over £10 million achieving a one per cent hike in prices during July, to stand 16.7 per cent up over the year.

"The commodities boom is continuing to create vast amounts of wealth for ultra-high net worth individuals around the globe, who still regard London's most exclusive postcodes as a highly desirable place to live or own property," explained Liam Bailey, head of residential research at Knight Frank.

"They are joined by select hedge fund managers whose earnings have scarcely been scratched by the credit crunch."

However, there were some positive signs for the central London market. For example, the average time a property sits on the market has fallen back below the 60-day barrier.

"Also, viewings continue to take place at historically high rates, indicating that the appetite for prime London property is not hugely dented - but rather that buyers are waiting for the market to stabilise before making a move," added Mr Bailey.

"The situation is unlikely to change until the mortgage market eases and the economic outlook improves.

"Therefore, further price falls are probable - confined to single figures if the market begins to ease, but potentially more significant if the global outlook deteriorates," he concluded.

Chris O'Toole

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• uk property news