Slump knocks 40% of price of home in four months

Fall: the six bedroom Victorian home has dropped £1.3 million since going on the market

A family home has had its asking price slashed by 40 per cent in what is believed to be the capital's steepest property reduction.

The six-bedroom Victorian house in sought-after Bedford Park, west London, went on the market in early March for £3.2 million.

Since then, the collapse in interest from buyers has forced the sellers to cut the price, first to £2.6 million in April, then to £2.25million in May and finally to £1.9 million this month - a total reduction of £1.3 million.

It is the starkest example yet of how the credit crunch and dearth of buyers has driven down asking prices in all but the very top of the central London market, which is dominated by wealthy foreign investors.

The Grabiec family, originally from Poland, are thought to have owned the house for many years and are likely to be sitting on a big profit in spite of the price cut. Estate agents said the property, although in a desirable location, had been badly overpriced initially and was only now attracting offers.

"The owners are pretty disheartened about the whole thing," said one. No house on the Grabiecs' street has ever sold for more than £2.1 million.

A spokesman for agents Faron Sutaria, who are marketing the home, said: "I think it's going to go pretty quickly now, but it started a bit too high. Even when it was on at £3.2million there were lots of viewings but no offers."

The 3,135 sq ft house has been modernised with a new roof, plumbing, wiring and bathrooms to increase its marketability. The spokesman said: "They did it up with a view to selling. It was pretty run-down before."

Dozens of other London properties have had 20 to 30 per cent carved from their original asking prices after failing to attract interest.

In recent weeks analysts have become increasingly pessimistic about prospects for the market, with forecasts of falls of up to 25 per cent over the next two to three years. Website propertysnake.co.uk, which monitors price reductions across the country, lists a sixbedroom house in Stadium Street, Chelsea, which has gone down 29 per cent from £1.7 million to £1.2 million.

Yesterday, it emerged that the number of mortgage approvals dropped to an all-time low of just under 28,000 last month, less than a third of the peak figure recorded in February 2002. With London accounting for roughly 15 per cent of the UK property market by number of transactions, that means only about 4,000 mortgages were approved in the capital in May.

WHAT THE EXPERTS ARE SAYING

Ed Stansfield, economist, Capital Economics

THE latest mortgage figures appear consistent with house prices falling by 15 per cent this year and continuing to fall next year and in 2010.

With no evidence that the mortgage credit squeeze is easing, affordability still poor, unemployment now rising and falling house prices likely to dent buyer confidence further, it is hard to avoid the conclusion that the housing market correction will be deep and prolonged.

Indeed, the dire picture of market activity painted by the the mortgage figures seems consistent with our recently revised forecasts - that by late 2010 or early 2011, house prices will be 35 per cent lower than at their peak late last year.

Howard Archer, economist, Global Insight

I am forecasting a fall of 12 per cent in house prices nationally both this year and next. I suspect London prices may fall slower than the national average this year but by a similar amount as the national average next year.

Latest survey evidence, including that from the Royal Institution of Chartered Surveyors and Rightmove, shows the London housing market is struggling markedly, although there are significant variations across the capital with the top end still growing.

However, it is still extremely hard for first-time buyers to get a foothold due to affordability constraints, while City job cuts and expectations of sharply lower bonuses are likely to have an increasing negative impact on prices.

Lucian Cook, research director of Savills

The contraction of mainstream mortgage markets, which we have seen since February, together with the rise in the costs of mortgages, are now biting in London.

Agents' stocks are three times last year's levels and sales are well down. Over the spring and early summer there has been a realisation that the credit crunch will have a lasting impact and that we are living with a completely different set of market conditions. So, even though affordability is not the main driver, prices have fallen much more rapidly over the past three months than in the early part of the downturn.

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