Financial trader's best deal yet: £5m home for just £3.9m

The effects of the credit crunch on the property market are providing opportunities for some buyers who are snapping up London homes for up to £1million less than the asking price.

Self-employed financial trader James Sanders bought a five-bedroom house in Kensington for £3.91 million, a 22 per cent discount on its price tag of about £5million.

The deal shows how a shortage of buyers is forcing vendors into agreeing big price cuts in order to sell. It comes a day after estate agents Savills said prime central London prices fell by 1.5 per cent in the first three months of the year, following a dip of two per cent in the last quarter of last year.

Mr Sanders, who owns his own derivatives trading business, said he would spend nine months renovating the property and then move in or re-sell, "depending on what it's worth".

"Once the credit crunch is over I'm going to be quids in," he said.

He said he knew he had a bargain because "a developer offered me a decent amount of money to step aside and someone else doorstepped the vendors and offered the same price".

The sellers kept to the deal because he had promised to complete within three weeks. "It wasn't even hard to mortgage," he said.

Mr Sanders, who is married with two young children, said there were other bargains available, particularly among those who had overstretched themselves at the top of the market or wanted to move their family to the country.

He said his mantra was: "Buy at the point of maximum fear."

His view was backed by some estate agents who said the current lull in the market would be shortlived in central London and now was a golden opportunity to pick up a bargain. Andrew Weir of Foxtons said he had seen 10 dips in 18 years, with causes such as the first Gulf war and the Asian banking crisis. On each occasion prices fell by around 10 per cent "and then everyone kicks back in again".

Peter Rollings of Marsh & Parsons said prices had fallen 10 per cent in all areas and categories except the very top and London had been like "a ghost town" - until last week.

"Now we are seeing new applicants starting to return," he said. "Where it was one or two a day in a branch, now it is five or six. They are the first little signs of green shoots. There is a lot more interest, if not actual deals yet. When we ask people, 'why are you interested in buying?', the answer is, 'because we are starting to see value'." Stuart Law of property investment firm Assetz said: "We expect prices to be down about seven per cent in London this year and that has to be a buying opportunity.

"London still has all the attributes that gives it robustness but this is the moment to buy, when some vendors are a bit desperate. The only risk is if mortgage rates go too high but we are already seeing the first headlines about rates going the other way.

"We think it will take until September for the mortgage market to be tidied up so the last opportunity to get a good property deal will be before the summer."