Home sellers forced to slash prices

Sellers in the most exclusive streets are being forced to offer huge discounts as the credit crunch finally closes in on the property market.

Average asking prices in Kensington and Chelsea have fallen £33,000 to £1,458,558 - down more than 2.2 per cent between March and April.

Across London, at least £3,838 was shaved off the £403,454 average house price while only five boroughs reported increases, according to property website-Rightmove. The number of unsold homes per estate agent branch also jumped from 67 to 70, the highest figure since early 2005.

Rightmove director Miles Shipside said: "The shine has come off even the top end of the market and the best price sellers can achieve has fallen.

"They will have to get smart and accept this new reality or find their property sticking. But if they are planning on buying in the same area, they stand to gain as much as they lose." Asking prices fell by 2.7 per cent (£14,604) in Richmond and owners in Ealing saw 2.4 per cent (£10,303) wiped off their home last month.

Yet in Hackney, values continued to soar by 3.8 per cent, another £17,616 per house. Westminster also saw increases of nearly one per cent (£8,854) on average asking prices, while in Kingston values rose £6,357 - 1.3 per cent.

Experts warned that the disparity will get worse before it gets better.

Analysts at Morgan Stanley predict that prices will fall 10 per cent this year and five per cent next year, forcing 1.2 million people into negative equity, when a home is worth less than the mortgage.

Earlier this week the Royal Institution of Chartered Surveyors also revealed that 78.5 per cent of estate agents reported falling prices last month, worse than the dark days of the early Nineties.

The Halifax reported prices down by 2.5 per cent between March and April, a time when the market normally picks up and buyers go house-hunting.

The Council of Mortgage Lenders is predicting 45,000 repossessions this year and Howard Archer, chief European economist at Global Insight, said price falls of 20 per cent over a couple of years were now a distinct possibility.

The sharp falls in normally buoyant Kensington and Chelsea could be made much worse by the prospect of mass redundancies in the City.

Those who lose their jobs may have to sell very quickly and accept low offers.

Owners coming to the end of cheap fixed-rate mortgages and facing massive increases in repayments could also join the ranks of the "must sell", further reducing prices.