House prices in the countryside have now fallen 3.1% overall year-on-year, says the latest research from Knight Frank, although prime properties continue to outperform the rest of the market. Prices of properties worth more than £5 million are still rising, up 0.2% on the quarter and 1.2% on the year, and overall prices are 3% higher than post credit-crunch low in June 2009.

The Home Counties market has been the most resilient, down 1% on the year, compared to a 10% decline in the North West, the report also concludes.

Grainne Gilmore, Head of UK Residential Research, said: ‘Despite recent headline price falls, there are marked differences across the regions, with the Home Counties benefitting from money flowing from London and overseas. Prices in the Home Counties have been the most resilient over the last year, slipping by just 1% – and still 10% higher than the market trough in 2009.

‘The £5 million-plus market for prime country properties continues to strengthen. Average values for these properties are still rising, up 1.2% on the year and approaching levels last seen when the market peaked in 2008. Demand has remained strong, with viewings rising by 13% in the three months to the end of November compared to the same period last year, and the number of new buyers registering their interest remaining steady.’

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Rupert Sweeting, Head of Country Department, adds: “Move much beyond the M25, however, and the market is more heavily dependent on domestic buyers. The deterioration in economic confidence has taken a toll on buyers across all property sectors over the last year and the prime market has been no exception.

‘Price falls in the North of England have been the most pronounced, with a 10% annual decline in prices. As the Eurozone crisis drags on, there is little sign that economic worries will be calmed in the months to come. Despite this nervousness, overall demand in the market was steady in the final months of the year, with an 11% rise in new buyer applications and a 4% rise in viewings. Supply levels have also risen compared to last year, with a 12% rise in new instructions and higher stock volumes.

‘The real sticking point has been in converting offers into sales. The rate of withdrawal for buyers who have agreed to purchase but who withdraw prior to exchange of contracts has risen sharply.

‘The market, especially for properties worth less than £5 million, is treading water but there is an opportunity for those trading up, as the gap between the value of their current home and the next level up on the ladder is narrower than it has been for quite some time.’

‘Despite these difficulties, it is worth noting that activity in the prime market has been much more resilient than in the mainstream UK market. While prime country sales are 16% lower this year than the market peak in 2007 (comparing January to September 2011 to the same period in 2007), sales in the mainstream UK market have halved over the same period.’

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