Owning a fancy London home on a notable road has recently lost some of its appeal. The rate of house price falls in London has overtaken that of the rest of the UK, Land Registry data out this week shows, with the average price in the capital now just £345,136, down 2.5per cent in June. These falls are being blamed on the decline of prime: just a few months ago, the prime market was resilient in the face of economic gloom and the credit crunch, but now Knight Frank, the top-end agent, reports a decline of as much as 10 per cent in the value of homes up to £2 million.

The problem is that the owners of prime homes priced under £3 million are dominated by City workers and corporate managers, who have been unnerved by the economic upheavals - a change from recent boom years, when the bonus season sparked months of property one-upmanship. Prime property transactions are down 50 per cent, Knight Frank says, compared with 39 per cent across all price ranges in England and Wales reported by the Land Registry.

But observers are taking comfort from the super-prime market, which Knight Frank now defines as homes priced over £10 million. There is a perception that super-prime will inevitably suffer a turnaround in fortunes in line with that experienced by mainstream prime. But Liam Bailey, Knight Frank's head of research, thinks that it may fleetingly have caught a cold. He explains: “When the credit crunch hit, the super-prime market was the first to stutter. Between October and February super-prime was dead, because of the chatter about changes to non-dom tax rules and nervousness about London's future as a financial centre. But super-prime prices are now higher than a year and even six months ago.”

High net-worth foreign buyers are choosing to stay put in London, seemingly unaffected by economic worries. Paul Tabor, of the property search agent Garrington, says that the rise of countries such as China and India is helping to sustain demand for the best London homes, which are - as ever - in short supply. The result is, as Liam Bailey says, “we are selling twice as many super-prime houses as a year ago. We have still got sealed-bid situations or best and final offers on properties above £8 million, and there is very little discounting.”

For those with a home worth less, experts counsel against feeling too downcast. Yolande Barnes, of Savills, expects prime property to rebound sharply when conditions brighten - a view shared by Liam Bailey.

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