Prices are now approaching the bottom of the downturn as vendors become more realistic, according to the latest research from Knight Frank.
Almost half of the decline, some 9%, occurred in the last three months of the year and the biggest price falls were around London but a lack of supply at the top end of the market means that the most expensive properties recorded the smallest decline, the Prime Country House Index shows.
'The market for prime country property reacted more slowly to the credit crunch than other sectors of the housing market, but all that changed towards the end of last year as vendors looking to sell were forced to adjust their expectations,' said Andrew Shirley, Knight Frank's head of rural property research.
'It appears, however, that the very top of the market remains the most resilient with prices for houses worth over £5 million dropping by just under 10%, compared with a 17% fall for houses valued at under £500,000. This reflects an underlying shortage of top-end prime country property,' he added.
The index also shows that vendors may have to drop prices by up to 25% on expectation in order to secure a sale. 'Drops of this magnitude will be a bitter pill for some vendors to swallow but are necessary to get the market moving again. The good news is that we are getting closer to the bottom of the market,' explained Shirley.
And he pointed out that it was no surprise that the biggest fall in prices came in the area around London. 'Many of those working in the banking and finance sectors, which have been hard hit by the credit crunch, live in the Home Counties. So it comes as no surprise that this is where values have been hit hardest by over 20% in some areas,' he added.
Scotland has seen the smallest fall in this sector with average values dropping by just over 11.5%.
The company believes that correctly priced property will continue to attract buyers and even competitive bidding in many cases. People are telling agents that they cannot put their lives on hold indefinitely and the tangible assets of bricks and mortar are beginning to look more attractive compared with the increasing volatility of stock market investments and minimal returns from cash deposits.
'Price falls this year will be more limited than in 2008 and the market for the best properties will flatten out soon,' concluded Rupert Sweeting, head of Knight Frank's country department.
