Property boom 'finally at an end'

Property analysts today warned that the London house price boom is finally over.

A series of reports points to the end of the "irrational exuberance" of double-digit price rises, with house prices in some of the most expensive boroughs now actually falling.

A new analysis by Rightmove, which tracks new sales instructions and is therefore the most up-to-date indicator of the housing market, found that asking prices in Greater London have now fallen by 3.5 per cent in the last six weeks, taking the average price down to £ 241,358.

Kensington and Chelsea, the most expensive area, has now seen prices fall 14.4 per cent since September, knocking £62,000 off the average value of a house sale.

Analysts are waiting to see if the downturn is the start of a collapse in house prices similar to that of the early Nineties. But no one is predicting a return to inflation-busting gains in property values.

Independent analyst John Wrigglesworth said: "The boom is indisputably over. We're moving into the pre-Christmas lull. What remains difficult to call is whether house prices will pick up in the new year. Declines in some areas and types of property, particularly at the top end in London, are to be expected."

House prices at the top end have been hit by falling City bonuses and job losses as the stock market slumps, although they continue to rise in cheaper boroughs such as Enfield, Ealing and Islington.

The Rightmove survey comes as analysts Capital Economics predicted a slump of up to 30 per cent in house prices over the next four years. It expects a 12 per cent rise in UK house prices next year before falls of five per cent in 2004, 10 per cent in 2005 and seven per cent in 2006 - based on the fact that the average house price is now 5.7 times the average salary, a higher level even that of 1989 when the last price crash started.

Roger Bootle, the analysts' managing director and a former Bank of England economist, said: "The message is clear. Houses are now so over-valued that a prolonged period of falling prices is on the cards."