Values of prime central London property fell by 1.5% last month – the fastest rate of decline since the early Nineties, according to a new report.

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Annual growth has dropped by 12.8%, down from nearly 38% in August last year, according to Knight Frank’s latest figures.

The weakest performance was found in the market under £1 million at -2.3% and the £1 million to £2.5 million bracket at -2.2%.

However, the high end of the market is holding on – £10 million plus properties saw no change in value, due to support from international buyers part funded by oil and other commodities.

Sales volumes in the capital are almost down a half year on year. Yet, sales in the £10 million and over sector are up 40% over the same period.

‘Up until April, London appeared to have escaped the worst effects of the credit crunch, but with the mortgage market in growing difficulties the weakness seen across the wider UK market is now spreading to the prime London market,’ says Liam Bailey, head of residential research at Knight Frank.

Mr Bailey believes the most important figures are those reflecting sales activity. ‘Sales are down by almost 50% across central London and this is where the effects of the crunch are being felt most keenly. Purchasers are struggling to access finance at the current time and combined with weaker sentiment this has led to a slump in sales.’

Yet, there is some positive news. While sales volumes are down, the number of purchasers registering to buy is lower – but only by 20%. ‘This suggests that we should the mortgage market recover later in the year the property market should see a recovery in activity,’ points out Mr Bailey.

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