Housing downturn won’t hit everybody equally

Yet in the immediate aftermath of the credit crunch all the markets were affected by a loss of confidence.

Significant price falls were broadly uniform, even though average prices in Kensington and Chelsea were more than three-and-a-half times higher than those in Barking and Dagenham.

Over the past 18 months the division between the markets has again become apparent. Those rich in equity, such as prime central and south-west London locations, have seen sales and prices rebound much more strongly than the mainstream.

And even within those mainstream markets, there has been a striking distinction between the purchasing powers of the baby boomers and the GCSE generation — who as first-time buyers need to raise a deposit higher than their annual earnings.

While house prices always grab the headlines, transaction levels give a much clearer picture of the property sector's health. In mainstream markets, transaction levels have remained low — at just over half their norm in 2008 and last year. It was a clear warning sign that price rises last year and in the first half of this year were unlikely to be sustainable.

Yet in the prime markets of central London, where wealthy overseas buyers regularly account for more than half of demand, exchange rates have presented a buying opportunity that has allowed transaction levels to recover more strongly.

It would also be easy to underestimate the strength of domestic wealth accumulated through the last decade. Markets in the likes of Fulham, Clapham, Wandsworth, Putney and Richmond have outperformed central London consistently over the past 18 months.

The resulting price growth may have overshot in the short term, and prices may be set to soften across all markets in the coming six months. But expect big distinctions between the equity haves and have-nots.

Lucian Cook is director of Savills Research