Credit crunch starts to hit prime London property

By Jennifer Hill

LONDON (Reuters) - Prime central London house prices are falling at the fastest rate since the early 1990s, data shows.

They went down 1.5 percent in May -- the fastest rate of decline since the house price crash of the early 90s, according to estate agent Knight Frank.

That takes annual growth to just 12.8 percent, down from a high of almost 38 percent last August.

Liam Bailey, head of residential research at Knight Frank, said: "Up until April, London appeared to have escaped the worst effects of the credit crunch, but with the mortgage market in growing difficulties, the weakness seen across the wider UK market is now spreading to the prime London market."

Liquidity problems have seen lenders scrap cheap deals and cut the maximum amount they will lend and to whom in recent months.

Data from the Halifax, Britain's biggest mortgage lender, showed on Thursday that British house prices overall fell a larger-than-expected 2.4 percent in May.

The weakest performance in the prime London market during May was seen in the sub-one million pound sector, where prices fell 2.3 percent, according to Knight Frank.

In the one to 2.5 million pound price bracket, prices dropped 2.2 percent.