Prospects for non-farming money, much of which originates in London, to channel through to the country market look bleak in the short-term after Savills forecast that residential values would fall 25% from their 2007 level by the end of 2009. It applies to both prime and mainstream markets.

“The state of the market today vindicates the tough line we took in June when we reforecast and adopted falls in value of 25% as our central view for both the mainstream and prime market,” said Yolande Barnes, head of residential research. “There are no immediate signs of a recovery, but we do not anticipate a further deterioration in this position.”

Even the £10m-plus ultra-prime central London market has not proved immune, and has levelled off sharply. The immediate outlook for prime central London is for a total 30% fall in values, largely because City sentiment, job and income security, have all declined in the past few months. But Savills remained confident that the prime markets, and the southeast in particular, would lead a recovery from early 2010. Regional recovery would depend on the rate of London recovery, and if City-based job losses exceeded 10%, the outlook could be worse, Savills warned.