London Falls

House prices in central London are continuing to fall - and at a faster rate.

The monthly fall accelerated in June, from a 1.5% decline in May to a 1.7% drop, according to estate agents Knight Frank, which says the downturn is slowly reversing last year's gains. However, prices still remain 7.5% higher than a year ago.

But the real story is that sales volumes have fallen off a cliff, and are down by 60% on June 2007.

Only the most expensive properties are selling, with prices down just 0.9% in June, and standing 22.7% higher than a year ago.

Liam Bailey, head of residential research at Knight Frank, said: "There can be no doubt that even property in prime central London has been hit by the double whammy of the credit crunch and wider concerns over the global economy.

"The headline price figures hide the marked slowdown in sales volumes. In some parts of the capital, the number of homes being sold has fallen by as much as 70% over the last twelve months - a result of the tightening market for mortgage finance and a crisis of confidence in the housing market."

However, he said that the market for properties worth over £10 million is relatively untouched by the gloom, driven by super-rich international buyers.

He added: "Elsewhere, there is some evidence that vendors are being more realistic. Achieved prices are now 4% lower than asking prices."

There are also fewer properties on the London market. New instructions fell by one-third in June. Knight Frank expects prices to continue falling this year and warned that "if the chaos continues" there could be double-digit deflation.

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