Sales volumes are now between 50 and 60% lower than average in many of London's most desirable areas, a report from Knight Frank has found.
Its latest London residential review has found that there are a growing number of rejected offers for properties, with some as much as 30% below asking price, and it is difficult to reconcile vendor and buyer expectations.
'After over a decade of rising prices in the capital, it is difficult for many home owners to accept that their homes may be worth as much as 20% less than a year ago,' said Liam Bailey, head of residential research.
'As a result they are unwilling to accept agent advice on appropriate asking prices or offers. Consequently, many properties are withdrawn from the market or remain unsold for long periods of time producing an unprecedented low number of transactions. Unless their properties are absolutely outstanding it is essential that they adopt a realistic attitude and listen to advice if they want to achieve a sale,' he added.
The report predicts further price falls in 2009 with the bulk of price falls occurring by March. Even the super prime sector – properties valued at over £10 million – will be affected although interest from foreign buyers in this market sector means that price falls will be more moderate.
It has also found that there is a glut of rental properties in certain price sectors as many buyers opt to put off a purchase until the market shows signs of improving and more and more vendors are putting their properties up for rental as a result.
Mortgage availability is also an issue. However, Knight Frank analysts do not forecast a sudden increase in lending. 'There are predictions that the base rate will hit 3.5% or even lower by next summer. If this is accompanied by increased liquidity in the money markets, these changes should feed through to mortgage availability,' the report concludes.
