Country house prices have fallen for the second quarter in a row, the first decline for two consecutive quarters since the beginning of 2003, according to Knight Frank?s latest report.

According to the estate agent?s figures, prices for prime country property are now 2.5% below their summer peak, having fallen 2.2% during the last three months of 2004.

However, despite the weak end to 2004, prices are 7.5% higher than at the start of the year, thanks to the strong performance during the spring and the summer.

The very top end of the country house market, above £2million, continues to perform well, as it is affected more by factors such as global economic confidence and stability than by this year?s interest rate movements, Knight Frank said.

?We have seen in this top end market in our own sales statistics. Demand for properties over £2million remains very high at the current time,? said Liam Bailey, Head of Residential Research at Knight Frank. ?Supply however, in this part of the market has not kept pace and this has become a significant factor supporting prices of the most expensive properties.?

Knight Frank forecasts that while lower priced property is at most risk from price falls over coming months, prime property will out perform the rest of the market over the next two years: ?We anticipate that it will be the most expensive parts of London and the country house market which will perform best in 2005 and 2006,? said Mr Bailey.