Houses in the £1million to £5million price bracket dropped 1.5 per cent in value during the first quarter of 2008, according to estate agent Savills, which also reported a “sharp fall” of about 40 per cent in the number of houses being bought and sold in London.

Savills said that this is likely to be a reflection of job losses and smaller bonuses in the City this year, and experts have commented on the disparity between the market as it is now and the way it was at this time last year, as the credit crunch takes its toll on house prices across the country.

The report from Savills said that: “The credit squeeze has had an impact on the main residential mortgage broking division with new mortgage completions down on the equivalent period in 2007.” Remortgage figures have remained steady, however.

The value of homes worth more than £4million also seems robust, and it is the only sector to see growth rather than decline – up by 1.7 per cent in the first quarter of 2008 – because the cash rich are largely insulated from market turbulence and economic cycles.

Upmarket estate agent Hamptons has also recorded a drop in value for high-end properties, but says that “properties that are realistically priced are being sold – with competitive bids taking place in high demand areas”.

First time buyer property has also taken a dive, as those trying to get a foot on the property ladder are forcing down prices, Moneyextra.com has found.

The drop in the number of people able to get a first time buyer mortgage as a result of higher fees and interest rates means that properties are not selling unless the price is lowered considerably.

Robin Amlôt, senior editor of Moneyextra.com said: “While it may be getting tougher to get a mortgage now, it would appear that those first time buyers who are in a position to buy are driving much harder bargains with sellers. Housing is very definitely a buyers’ market now rather than the sellers’ market that existing homeowners had become used to.”

The average property being considered by first time buyers was £170,559 in April, down 10.25 per cent compared with December 2007. However, the amount that first time buyers are borrowing has risen to its highest ever level of 82.89 per cent.

This is expected to change as the effects of lenders withdrawing deals in their hundreds begin to show, specifically 100 per cent mortgages which are now non-existent. Yesterday, Woolwich became the latest in a long line of lenders to demand a 10 per cent deposit.

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