Prices for prime country houses fell on average by 16%, during 2008, with a fall of as much as 9% for the final three months of the year according to the latest report from Knight Frank.

The market for prime property reacted more slowly to the credit crunch than other sectors of the housing market, but all that changed towards the end of the year, says the report.

It appears though that the very top of the market remains the most resilient part, with prices for houses worth over £5m dropping by just under 10% compared with a 17% fall for houses valued at under £500,000 which reflects an underlying shortage of top-end prime country property.

‘It’s worth noting that the houses in our index are among the best in their class and price reductions of 25% or over may be needed to secure sales of properties that do not score at least eight out of ten against purchasers’ expectations,’ said Andrew Shirley, Knight Frank’s head of rural property research.

‘Drops of this magnitude are a bitter pill to swallow but are necessary to get the market moving again. The good news is that we are getting closer to the bottom of the market,’ he added.

Rupert Sweeting from Knight Frank’s Country Department added: ‘Last year was without doubt one of the most difficult the market has ever faced, but there are some signs that confidence is returning to buyers. 2009 will not be easy, but vendors are now far more realistic and accept that prices have already fallen quite significantly.’

Knight Frank’s Country Department anticipate that falls this year will be more limited than in 2008 and the market for the best properties will flatten out soon. ‘There is still a limited supply of ‘best in class’ houses and having found their ideal property purchasers will be keen not to lose it. After all, a house costing millions of pounds is a once-in-a-lifetime purchase for many. Nobody rings a bell when the market hits the bottom so those who hang on too long may lose the house of their dreams,’ Mr Sweeting concluded.