Prime London properties have experienced their first decline in five years despite economists predicting that they would be largely immune to the national housing slump.
A study by Estate Agents, Savills, has revealed that high-end city properties valued at more than £1million have seen a two per cent drop in the last three months. The decline is being attributed to a lack of spending by those in the City earning large bonuses which usually kick starts the affluent housing market.
Lucian Cook, Director of Research at Savills told The Times
that the research showed that the credit crunch is beginning to effect on this sector and he expects only £2 billion from the total bonus fund of £7 billion, to be spent on property.
"The market has been influenced by City bonus expectations and the outlook for job security in the financial sector," he said.
However, despite this, Mr Cook said the outlook was optimistic and prime London property prices were rosier than they had hoped:
"This small fall comes as no surprise. We anticipated a fall of three per cent in the final quarter of the year, in expectation that the market would react in a similar manner to previous financial shocks," he added.
According to Mr Cook, areas southwest of the river such as Fulham, Barnes, Putney, Wandsworth and Richmond have seen price increases of around 0.6 per cent, mainly due to the City bonuses being spent there.
In addition, Central London property is most likely to recover and see around a five per cent increase while areas of so-called 'super-prime' properties, homes that cost upwards of £5 million such as Mayfair, Kensington and Belgravia are most likely to see significant increases despite being 2.5 per cent down on last year's 13.7 per cent growth.
Mr Cook went on to say that Super-prime remains the most resilient part of the property market, despite an annual growth rate of 29 per cent, down from 50.16 per cent a year ago.
A further report following research conducted for The Daily Telegraph
has claimed that the average house price is set to decrease in 2008 by around four per cent - the first annual fall in the past 15 years. For a home worth £200,000, the drop is expected to be around £8,000. While this is not too concerning for those owning lower-priced houses, London properties could report significant losses.
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