Buyers will flock to the high-end of the British capital, which has not been affected by financial woes, and other areas now being gentrified
There will be a flight to quality by London home-buyers this year, analysts forecast. Trouble in the financial markets and uncertainty about whether Britain will go into recession mean fewer people are looking to buy property in the British capital and those who do will focus on prime residential districts where property values should hold up strongest.
According to Halifax Bank, Britain's largest mortgage lender, London property prices are 7 per cent down from their peak of last July.
However, the top end of the London property market has been relatively resilient. Research from Knight Frank shows prices rose 0.6 per cent for properties in central London's prime residential districts of Kensington, Chelsea, Knightsbridge, Mayfair and Belgravia last month, following a 1.1 per cent rise in January.
This sector of the housing market had the biggest house price rises before the slowdown. They were rising at an annual rate of 40 per cent in July.
'As this market depends to a great extent on the strength of the City it is inevitable that the unease in the financial sector is influencing its slowdown,' said Liam Bailey, head of residential research at Knight Frank. 'However, it is clear that city money is still being invested in prime central London properties, though perhaps not with the same enthusiasm that followed last year's bonus round.'