London house prices 'to fall further but recover faster'

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Property giant Jones Lang LaSalle (JLL) today forecast prices to fall 15%-17% in Greater London and 16%-20% in central London in 2009, compared with falls of 13%-15% elsewhere in Britain.

It blamed the financial crisis which has seen tens of thousands of job losses in the City and Canary Wharf and the collapse of bonus payments hit demand for homes in some of the capital's most exclusive areas.

"Clearly, and understandably, London is bearing the brunt of the financial crisis," said Neil Chegwidden, JLL's head of residential research. "London's economy, the financial and property sectors, and the jobs market have been hardest hit."

A fall of 20% would knock £200,000 off the value of a £1 million house in central London. Prices have already fallen between 15% and 20% this year.

JLL forecast prices to fall again in 2010 by between 1% and 3% around the country but is predicting slight growth across London before sharp increases approaching 10% in 2011.

Chegwidden said: "London is likely to lead the housing recovery, which will be gathering pace during 2011 and is likely to be boosted in the run-up to the 2012 Olympics.

"The medium-to-long term outlook for UK house prices is very positive. Not least of the reasons behind our conviction is that the much publicised gap between demand and supply is not only already significant, but that this divide will undoubtedly widen over the next few years."

JLL said prices would fall nearly 30% from peak to trough in the crash and said London prices would start to recover before the recession ends.

"When economic recovery begins, London, as the UK's business and financial hub, will be the first to see increased business activity, investment and ultimately employment," Chegwidden said.