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London hit hardest by property market fears
Hugo Duncan, City Correspondent29 Oct 2007
House prices in central London fell this month as fears of job cuts and shrinking bonuses knocked confidence in the capital.
Property information group Hometrack said the average cost of a home in central London fell 0.5 per cent this month - the highest rate for any part of the country.
It came as thousands of City workers braced themselves for a wave of job cuts in the wake of the credit crunch.
About 6,500 bankers and fund managers are likely to lose their jobs in the coming year and bonuses may fall by around a fifth, according to the Centre for Economic and Business Research.
Savills, which specialises in selling homes worth £1million or more in London, predicted the amount of City bonus cash flowing into the top end of the market would fall by 60 per cent next year. This would lead to six months of falling prices in central London, it said.
Savills blamed a loss of confidence in the housing market among financiers, accountants and lawyers, many of whom are now ploughing their money into hedge funds and other investments.
The fall in house prices in the capital is the starkest evidence yet that the decade-long housing boom is coming to an end.
It follows six interest rate rises since August last year to a six-year high of 5.75 per cent. Confidence has also been hit by the crisis at Northern Rock.
Average prices across the whole of London fell 0.2 per cent to £316,000 this month, while the average cost across England and Wales was down 0.1 per cent to £176,100, the first fall for two years.
The monthly fall meant prices are now just 4.4 per cent higher than they were a year ago.
Reader views (2)
Again, the press trying to cause panic. If you read the whole article, what is evident is that the rate of increase has slowed. Prices are still 4.4 per cent higher than year ago! That does not make a fall in price. Prices could not have gone on increasing at the rate they were last year. That is a different story.
- Beatriz, London, 29/10/2007 12:08
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The sharp fall in house prices began 6 months ago - it is surprising how long it takes for the information to arrive in reports such as this. My concern is that the banks will become very, very nervous about their exposure to all the empty flats in London and provincial cities.
In Nottingham I was offered a block of flats built in 2005. All 22 flats have remained vacant since the day they were finished.
- Lionel Sinclair, Acton, 29/10/2007 12:04
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