London house prices drop at record rate says Knight Frank

Since the peak of the market in March this year, prices have fallen by 13.4%. And the six monthly decline in price – from May to October - was 12.4%.

All areas of the capital have been hit by falling prices – with only a slight difference in the rate of decline between houses and flats, which fell by 3.8% and 4% respectively.

Liam Bailey, head of residential research at Knight Frank, said that it was not until the recent banking collapses that many house sellers moved to further slash their prices.

As a result, he said: ‘There is a bright side to the price falls – they reflect the fact that vendors are now increasingly realistic about price levels and are more understanding about what prices are achievable. Whilst the market is still well down on historic sales volumes, the reassuring element is that sales volumes rose slightly during both September and October while prices fell sharply.’

He said that Knight Frank does not ‘expect the market to bounce back any time soon – but the indications are that cutting prices to sensible levels gives you a half decent chance of achieving a sale.’

The swift decline in house prices is equal to the rise that houses had been experiencing in the boom, he said. ‘We have become used to prices rising and falling at a glacial pace in the UK, generally prices move a maximum of 2% per month – which can still add to fairly punchy annual rates of change.

‘But a 4% fall in price in a month is suddenly very noticeable – equating to £160,000 on a £4m house (or more than £5,000 a day). We ought not to be too surprised, at the height of the recent boom prices were rising by the same rate, so there is a symmetry of sorts to the current pattern of price movements,’ he said.