House prices in London are proving to be less than resistant to the trends in the rest of the country: according to Knight Frank, prices fell by 1.7% in June bringing them 3.1% lower than they were three months ago.

Sales volumes also dropped in the past twelve months by around 60%, although super prime properties at the very top of the market are proving remarkably resilient: prices fell by just 0.9% last month, standing 22.7% up year-on-year.

Interest is still high in the market, however: ‘The number of viewings remains high by historic standards, suggesting that demand for prime Central London remains strong, with buyers waiting for more normal mortgage market conditions to return,’ the report states. ‘However, central banks are focussed on controlling inflation through higher base rates, while the institutions themselves are still highly risk-averse, a situation that seems unlikely to change given ongoing crises in the financial markets.

Head of Residential Research Liam Bailey said the market ahead remains uncertain:’Property prices in Prime Central London will continue to fall for the remainder of 2008, except at the very top end. The extent of the decline will depend on whether more problems emerge in the wider economy in the second half of the year. If the situation eases, the fall will be confined to single figures. If the chaos continues, a double-digit decline is conceivable.’