Prime central London property values are down -8.7%, rounding off a year that has seen average prime central London values drop by 18.3%, according to the latest report from property consultancy Savills.
But clear indicators are emerging of the essential forces needed to drive eventual market recovery, the report also says.
Overall there has been a drop of 20% across the board from the peak levels of September 2007. This has wiped over £13,000 a month off the value of what once a £1 million family home and left average values around their autumn 2006 levels.
But the price falls provide clear opportunities to international buyers and equity-rich long term owners looking to upsize in 2009.
'The pattern is pretty much uniform with few significant differences between locations and housing types. The areas most susceptible to City job loss fears took the sharpest dip. These include houses in Notting Hill, Kensington and Holland Park, which recorded extraordinary gains of 46% over 2006, on the back of record City bonus money, but saw falls of -11.2% in the fourth quarter of 2008 alone,' she added.
Occasionally, prime central London properties have sold at 30% off peak values where vendors have had to sell in a hurry. 'These prices are, effectively, next year's, 2009 bargain prices. They suggest at what level the market might stop falling, and give credence to our forecast that average prime central London prices will fall no lower than -30% from peak, reaching the bottom probably before the end of 2009,' Barnes predicted.
Ultra prime property, those worth millions, had continued to see values rising until the middle of the year. That is no longer the case, the report says, but as very few have sold in the last few months it is hard to establish what their current market value might be.
These properties are very much subject to the 'wait and see' game. However, traditional super prime areas including Knightsbridge, Mayfair, Belgravia and Chelsea have succumbed to -9.9% falls in the quarter, bringing total falls from peak to –17%, the report shows.
'London's prime markets are starting to look very cheap by recent standards. With sterling losing value against most of the major world currencies, this leaves it looking good value by international standards in particular,' said Barnes.
'In previous downturns, it has always been overseas investors who pulled the prime London market out of the doldrums. An analysis of the combined effects of the housing market and currency fluctuations shows that prime London properties would now cost 50% less to a new Japanese investor and 40% less to a Hong Kong, Singaporean, Taiwanese, Swiss or Eurozone investor. With global bargains like these, the start of the recovery may well be driven by equity rich investment from the Far East or Europe,' she added.
The prediction is that equity-rich, longer-term recovery buyers will start to emerge in 2009.
