Skip to content

Prime London property prices hit by job losses and fear of unemployment

Overall prices for the best properties in prime central London fell a further 2.2% in December and on average; prime prices dropped by nearly 10% in the final quarter of 2008 and have fallen 18.4% from their March 2008, the latest index from Knight Frank shows.

Properties costing £1 million to £2.5 million have been hit hardest and are 22% down from their peak

Houses worth over £10 million are down only 8.1% from their August 2008 peak. However, they are now falling in line with the rest of the market.

According to Liam Bailey, head of residential research, Knight Frank's prediction that the market will see a 30% peak-to-trough fall in value looks likely to be borne out.

'The market worst affected by the price falls is the £1 million to £2.5 million sector – the so called entry-level prime market. This segment of the market, favoured by city workers and other salaried professionals, is the one that appears to have been hit most by actual job losses and fears of further job cuts in 2009,' he said.

There is little respite from the bad news across any of the central London markets. Flats and houses have been hit as much as each other and prices have fallen from Canary Wharf across to Chelsea. The only bright spot appears to be that the rate of price decline is beginning to slow with the 2.2% fall in December the smallest drop since September 2008.

'Despite the slowing rate of price falls, it is too early to say that the market is turning a corner. The number of new properties coming to the market in December was slightly higher (1%) than the same month a year earlier, however the number of properties sold was down by 44% over the same period,' said Bailey.

Looking forward into 2009, analysts believe that the market's fortunes will be driven by economic conditions especially those in the City. 'We are still holding to our forecast of a 30% peak-to-trough price adjustment, suggesting that by the Spring we will be fast closing in on the low point of the market in terms of pricing,' added Bailey.

In terms of sales volumes, 2009 is likely to be as weak as 2008 with £1 million plus sales at or below 3,000 in Greater London, well below the level we have got used to in recent years.

Related