House prices in Prime Central London fell by 1.5% in the first quarter of 2008…

The most significant falls have been seen in the £1m - £2m price bracket, the domain of City employees, where falls of 2.7% were recorded.  As a result year on year price growth has fallen to 5.3% from 27.6% a year earlier.

Lucian Cook, Director Savills Residential Research comments, “The prospect of continued job losses in the City resulting from the credit crunch is having a knock on effect on the demand for property. It is now fair to say that it is no longer a case of one or two quarters of price falls with values bouncing back shortly thereafter as was the case in 1998 and 2001.

“The situation is looking much more like that of 2002 and 2003 with slightly more prolonged falls in prices and a period of low price growth for the following 12 to 24 months. Whilst we acknowledge that ultimately the performance of the sub £5million prime central London housing market will be dependant on the as yet unknown outcome of the credit crunch, we currently expect prices to fall by 4% in total this year, in addition to the 2% falls seen in the last quarter of 2007.”

”We expect some demand to shift into the rental sector. In contrast to capital values, rental values rose by 1.5% in the first quarter of this year and for the first time in two years annual rental growth (6.3%) exceeds that of capital value. As a result net rental yields are set to increase from an unsustainable low of 1.9% at the end of 2007.