House prices fell for the first time in two years this month, following two months of stagnant growth, while the annual rate of house price inflation has fallen to 4•4%. The Times, Daily Telegraph, The Guardian

House prices have fallen by 0•1 per cent this month as higher interest rates and falling confidence continue to bite.

Further, the wealthy are losing confidence in bricks and mortar as an investment. There has been a big drop in City bonuses being used to buy prime property in Central London and in the popular second-homes areas, triggering fears of price falls in the South West, East Anglia and the Cotswolds.

And a new warning from America, that Britain would not escape the fallout from the US as the property market there went through its worst recession in 16 years. Robert Shiller, Professor of Economics at Yale University, who forecast the end of the bubble in March 2000, said that the slowdown would start in London.

City bonus cash flowing into prime London property and into second and third homes will fall by 60 % to £2bn in the coming year, according to Savills. This will lead to at least six months of falling prices in Central London. Also at risk are the Cotswolds, the South Westand parts of Norfolk, Suffolk and Kent.