Asking prices fall £20,000 as house sellers cave in to the credit crunch

A new survey shows the price for a London home dropped by more than five per cent between July and August - the equivalent of £21,096. It now stands at just under £379,162.

According to Rightmove, which compiled the figures, asking prices fell in every single borough. But areas where new Olympic-linked public transport projects are expected to improve access fared less badly than other parts of the capital.

The biggest percentage fall was in Wandsworth, where asking prices are down by 7.9 per cent. In Hackney they fell by just 0.6 per cent.

In cash terms, the biggest losers live in Kensington and Chelsea, where asking prices fell £88,384 in the last month. In Westminster the fall was £64,877.

At the other end of the spectrum, asking prices fell by a relatively modest £2,767 in Hackney, £7,653 in Bexley and £8,188 in Southwark.

A spokesman for Rightmove said: "Faced with the scarcity of mortgage availability and the increase in unsold property, summer sellers have recognised the need to price aggressively."

Year on year asking prices in London are now 3.8 per cent lower than they were a year ago - in line with the situation in the South East and the South West, where annual asking prices are down 3.7 per cent.

Miles Shipside, commercial director of Rightmove, said prices could begin to stabilise in the autumn.

"Sellers who choose to come to the market during the peak holiday season generally have a greater need to sell," he said. "As a result, properties coming onto the market in July were on average over £21,000 cheaper than last month.

"Every borough in London saw a month on month fall in asking prices in July, and in all but six boroughs asking prices are now lower than a year ago." Mr Shipside said areas following the route of the Olympic-linked East London line extension, which will open in 2010, were more resistant to the drop in prices.

"New sellers coming to the market are still seeking prices higher than a year ago in Tower Hamlets, Hackney, Islington and, to a lesser extent, Southwark," he said.

"This is because these boroughs will see the benefits of new transport links in the near future, without suffering from current disruptions due to building works."

Property prices in London began to fall in January after more than a decade of strong rises.

The Bank of England revealed last week that the number of new home loans agreed has fallen for 14 consecutive months and is now at the lowest level since records began in 1993.