The good times appear to be over for home-owners in London. Few remnants of last year's record-breaking boom, in which prices were driven up by international buyers and good years in the City, remain. The end of cheap home loans and the tide of worrying economic news has caused a sharp reversal of sentiment in a capital that felt immune from such concerns. Nationwide, the lender, now say that the average house price in London - now £285,568 - is 2.3 per cent lower than a year ago.

But there are bright spots. Savills this week issued a bleak trading update warning that sales in the previously immune prime market had almost halved, with prices down 7.5 per cent this year. Yet, just as he advised that further declines are likely, Jeremy Helsby, Savills chief executive, said demand for super-prime homes continues unabated, at least for now.

Agents say that a perfectly kitted out lateral apartment or trophy period home, located in the best parts of Belgravia and Knightsbridge - on the market for £5 million or more - will sell, and quickly, at prices equal to those achieved last year. Knight Frank is marketing such a home: an impeccably finished six-bed property behind the classic stucco façade of Chester Square, for £15 million. Suitable for an international entrepreneur made wealthy in metals, oil or other resources, the agent does not expect it to remain on the market for long.

But can values hold firm in secondchoice areas, which graduated to the prime league only recently? The fine Victorian homes in Islington's historic estates of Canonbury and Barnsbury sell at enticing discounts to similar areas farther west. Now the market is slowing, the area - reliant on buyers with wallets full of City money - should be suffering. But it seems to be holding its own: in three of the past four months it has been among the top five London suburbs, with consistently rising asking prices, according to the website Rightmove. Anne Currell, of Currell Residential, says: “This is a City area in the broadest sense: it is not just those aged under 30 buying, it is also heavyweight bankers and financial advisers, and also many commercial and financial lawyers.”

Lonsdale Square - just streets from Tony and Cherie Blair's former family home in Barnsbury - epitomises the appeal of the once-shabby area. Thought to be the only Neo-Gothic square in London, it was designed in the 1840s by a church and college architect, Richard Cromwell Carpenter. Then, as now, it was described as “well worthy of the attention of small capitalists desirous of availing themselves of ... good home property.”

Much of the Grade II* listed square remains in the form of flats. For £240,000 one local agent, Jeffrey Nicholas (020-7354 0707), has a scrap of property that could be converted to a one-bed flat. But elsewhere, houses have been rescued from conversion and pieced together for family use.

At No38, the architect Barbara Weiss is selling her six-bedroom terraced house, parts of which were returned to family use from flats and offices over the two decades in which she has owned it with her husband, Alan Leibowitz, a managing director of the property company Dorrington. Having knocked through to the neighbouring house, the couple have established a stylish master bedroom suite across the divide, with a double study, double dressing rooms and bathroom, a warren-like basement with space for staff and teenagers, and a double garden. It is on sale for £3.9 million.

Yolande Barnes, head of research at Savills, has warned buyers to beware of the “high tide” effect in which newly prime areas may subside in value most quickly. But Islington - impeccably located and in parts utterly lovely - may hope to keep its place as a top-drawer location. Anne Currell predicts: “Islington will weather the storm because it's got so much going for it. The people who really discovered it came 30 or 40 years ago. But now it is very much a maturing market.”

Capital values

House prices in Camden jumped 1.4 per cent to £551,206 on average in May, according to the Land Registry Kensington and Chelsea rose 1.1 per cent to £873,060

Westminster homes were up 1.1 per cent at £632,074

Merton jumped 1.1 per cent to £351,650

Wandsworth values rose 0.4 per cent to £401,280

Richmond was up 0.2 per cent at £452,256

Ealing held steady at £339,545

Lambeth fell 0.6 per cent to £353,846

Bromley was down 0.7 per cent at £312,056

Greenwich prices slid 0.8 per cent to £280,153

Hammersmith and Fulham dropped 0.9 per cent to £497,922

Hackney was 1.1 per cent lower at £371,903

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