London hit by property slowdown

Research from estate agency Knight Frank shows that the number of houses being sold in the capital is at its lowest level for over 10 years.

The agent said prime properties in Central London have been affected. Sales of expensive homes from January to March were down by 20% compared with last year’s figures.

In the same period, there were just 1,160 sales at above £1 million in London compared with 1,450 in the first quarter of 2007.

As a result, sellers are being forced to reduce their property price by hundreds of thousands of pounds.

In the first quarter of 2008, approximately 9,000 properties were sold in London. Last year, homes were being sold at the rate of 16,000 a month. Mouseprice.net, the property information website, said sales have been slower than in any period since 1995.

For example, a property in Paultons Square, Chelsea, has had a quarter of a million shaved off its original asking price of £3.5 million in an effort to find a buyer.

Miles Shipside of property website Rightmove said many sellers are trying to cash in on the equity they have made from the boom of the last 2 years. However, pricing your home on this basis is ignoring the worldwide financial turmoil, increased competition from other unsold properties and the challenge buyers now face in getting a mortgage, added Mr Shipside.

It’s human nature but in the current market sellers should price below their competition to avoid a larger price drop later in the year, said Mr Shipside.

According to Seema Shah of analysts Capital Economics, prices in the South-East and London fell by 0.7% in January and 0.5% in February.

The latest London View report from estate agents Cluttons said properties at the top end of the market are still selling quickly despite a cooling property market.

The report said high-end properties and those in desirable locations have, to date, been immune to the slowdown that is affecting the rest of the property market. These homes are selling quickly and they are going to best bids.

Mortgage squeeze: How is it affecting you?

Mortgages are getting harder to come by. First Direct has become the first high-profile lender to close its doors to new customers.

The bank - one of the country's top 20 home loan providers - gave only five hours' notice that it was effectively closed to new business on Tuesday.

The move came as figures showed that more than 90 mortgage products a day have been scrapped over the past week as lenders try to hoard cash. At the end of March there were 5,785 products available to borrowers - there are now less than 5,320.

It is now also almost impossible to get a 100 per cent mortgage, with Scottish Widows wanting at least 5 per cent deposit for young professionals such as doctors and accountants - previously they were able to borrow 110 per cent of the property's value.

Experts warn that more than two-million home owners on variable interest rate deals could find that their mortgage bills increase if other lenders follow suit.

The hardest hit, however, are first-time buyers and the estimated three-million home owners who are due to refinance their mortgages over the next 18 months.

We want to know if you have been turned down for a mortgage or are finding it hard to get an affordable deal from lenders?