Reality of slump hits home as prices fall £100,000 in fortnight

In the last two weeks, sellers have finally faced up to the "new reality" of the depressed London market after months of denial, figures reveal today.

They show that hundreds of asking prices have been dramatically cut in the past fortnight with reductions in the two most expensive boroughs averaging more than £100,000.

Sellers in Westminster who have dropped their price have knocked off an average of £108,166, while those in neighbouring Kensington & Chelsea have lopped £100,797 from their original demand. Across London as a whole the average reduction among vendors who have lowered their price was £28,796 in the two weeks since 10 November, according to figures from property search engine Globrix.

Experts said sellers had been slow to accept that their properties are now worth much less than they were at the peak last year before the credit crunch started to bite. As recently as last month, vendors were expecting asking prices to be only 5.4 per cent down on a year ago. But actual sales are being agreed at around 20 per cent lower than this time last year.

David Smith, of estate agents Dreweatt Neate, said: "In recent weeks, not only are people putting their properties onto the market at a more realistic price to begin with, but unsuccessful sellers are cutting original asking prices. There's only one way to sell your home in this market, and that is to ask a price for it that is totally realistic. Prices are falling and being slashed left, right and centre."

Globrix has for the first time tracked the actual amounts by which asking prices have been reduced across the boroughs. In Camden the reduction averaged £55,728, in Richmond it was £44,313 and in Lambeth it was £40,842. The smallest cuts were in the cheapest boroughs: £11,464 in Barking & Dagenham, £11,629 in Havering and £11,213 in the Olympic borough of Newham.

Globrix director Daniel Lee, who compiled the figures, said: "For cash buyers and people with the finance in place to move quickly, there are some great opportunities at bargain prices. Buyers are now holding all the cards and sellers need to realise that if they want to sell then they may have to accept an offer they wouldn't have even considered six months ago."

One reason for lower prices is the continuing mortgage squeeze. The number of home loans approved last month was 52 per cent down on October 2007, only just above the all-time record low set in August. Seema Shah of the Capital Economics consultancy said: "Mortgage lenders are not passing on the full cuts in base rates to new borrowers and have continued to tighten lending criteria, the economy is contracting and is set for a deep recession. Buyers are hardly likely to return in their droves and activity is set to remain very subdued."