Property premier league bucks the credit crunch

The market for the most expensive homes in London is expanding despite the economic crisis, research for the Standard has found.

Sales at £10 million and more have increased, with the number of transactions up by a third in the year to last month. Virtually all the buyers at this price at present are foreign, with the Middle East dominating again.

The survey, carried out by estate agency Savills, found that the upper end of the London property market now falls into three distinct "leagues".

At the top is the narrow tier of homes selling for £10 million plus. In the larger tier below, prices range from £5 million to £10 million. Here, sales volume is down by a third. This is the section of the market where City staff who have enjoyed big bonuses have been competing with wealthy - but not billionaire - foreigners.

Below that is the £1 million to £ 4 million bracket, almost entirely driven for the last few years by City employees on the expectation of their bonuses. In this category, sales have slumped by 45 per cent. In the lower two leagues, muchreduced demand has been driving prices down.

But in the £10 million-plus "premier league", prices have actually gone up, by 0.6 per cent since June.

Elsewhere in the market prices are 12.1 per cent lower than this time last year. Savills research director Lucian Cook said: "Buyers have been quick to respond to the prospect of falls in City employment and earnings. The areas most reliant on demand from the financial and business services, Kensington and south-west London, are most severely affected.

"In the traditional areas of Knightsbridge, Mayfair, Chelsea and Belgravia, old money and international demand are keeping prices more stable.

"However, only the very top tier - the ultra-prime £10 million plus market - continues to see demand and values holding firm, driven as it is by a growing number of global billionaires."

How long the "premier league" can withstand the pressure of a global economic crisis is uncertain. "We don't quite know how this sector will react to the downturn. While we don't expect many records to be smashed in the coming months, neither do we expect a rush of distressed sellers," said Mr Cook.

There are indications the boom at the very top end is slowing. Separate research by estate agency Knight Frank found prices in the top tier dropped 1.7 per cent in this sector last month.

Liam Bailey, the agency's head of residential research, said: "Given the ongoing chaos in the financial markets and mounting concerns over the future of the world economy, it is not surprising that confidence is still low.

"At the very top end, even after September's fall, prices are still 11.7 per cent higher than a year ago and there is still competitive bidding for the most prestigious properties. At the lower levels of the million-plus market, however, it is now possible to envisage a double-digit fall for 2008."

It comes as figures show the number of new homes being built has sunk to an all-time low. In the three months to September, 38 per cent more surveyors reported a fall than a rise - the lowest since the Royal Institution of Chartered Surveyors study started in 1994.