London property prices now falling faster than rest of UK

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Properties that came on to the market this month were, on average, £4,500 lower than in May.

The 1.4 per cent fall, compared with a national average of 1.2 per cent, was the biggest monthly drop since 2005, when prices fell 0.7 per cent in one month.

It suggests vendors are at last realising overpriced homes will not attract buyers and that the capital's property market is not resilient to the credit crunch, while supporting predictions of substantial price falls to come.

Property price monitors Rightmove also found the number of properties per buyer rose to 15, compared with seven a year ago.

In Greenwich, the average asking price fell £7,000 in the month to stand at £260,400. But central London continued to resist pressure to reduce prices - in Kensington and Chelsea and Westminster values rose by 0.6 per cent and 0.7 per cent respectively on average values of more than £1 million.

Miles Shipside of Rightmove said today: "When more sellers of similar properties are in competition they drop their prices to attract buyers.

"It is the less desirable areas with more run-of-the-mill homes that tend to fall first. The middle to top end of the market has seen more hype in their pricing, so if the slowdown continues, they could find they have to make further reductions.

"For most, that means whatever they were thinking of asking at the peak of the boom, take at least 10 per cent off."

Mr Shipside added: "Given the higher level of competition, the difficult economic background and low level of transactions, sellers and estate agents must find ways of selling their way out of this downturn."

Lucian Cook, head of research at agents Savills, said: "The slowdown we faced at the beginning of the year has now become a downturn.

"We are now predicting an eight per cent fall in UK prices this year and 10 per cent in central London. However, in the £5 million-plus market we expect to see prices continuing to rise, albeit by only three per cent this year."