According to Knight Frank’s November Prime Central London Index 2008, prime residential prices in central London fell by -3.6% in November, which was the largest fall on record after the decline of -3.9% recorded in October.

Prices are now -14.1% lower than last year, and have fallen by -9.3% over the last three months alone. All areas and property types have been hit by falling prices and houses are now depreciating at a faster rate than flats. In addition, the weak pound is beginning to stimulate foreign interest in prime London property.

Liam Bailey, head of residential research at Knight Frank, said: “Prices for prime central London property have now been falling for eight consecutive months and annual growth now stands at -14.1%, the lowest rate since the index began in 1977. In June 1990, at the height of the last slump, the annual fall amounted to just -10.6%.

“The value of houses in prime areas of the capital fell by -4.1% in November, a greater decline than the -3.2% recorded for flats. Consequently, areas with a greater number of entire houses, such as the northern areas of prime central London, are no longer outperforming the market.

“The last few months have seen vendors gradually accepting that prices need to be cut if a sale is to be achieved. The rate of transactions in most of our offices appears to be increasing, albeit from a low base. Indeed, last month’s record fall of -3.9% may have reflected a sudden adjustment in expectations, explaining why the rate of decline has fallen back slightly to -3.6%.

“These dramatic falls may be painful to vendors, but prime London property is increasingly looking like very good value, particularly to foreign buyers who also benefit from the weak pound. Indeed, a fall of 15% may translate to a fall of as much as 35% to someone watching the market from the USA, as the pound has fallen by 20% against the dollar since the beginning of the year. There has been an increase in interest from such buyers over the past few weeks, which has not yet been translated into activity.

“Given the overall economic situation, we believe further price falls are to come. However, as many prime properties are unique and only occasionally come up for sale, we believe activity will increase as overseas buyers realise the home they have had their eye on for some time is now available at a much reduced price.”