"Prices fell, on average, by 16% during 2008, according to our Prime Country House Index, but 9% of that decline – the sharpest quarterly fall on record – came in the final three months of the year alone.
"It appears, however, that the very top of the market remains the most resilient with prices for houses worth over £5m dropping by just under 10%, compared with a 17% fall for houses valued at under £500,000. This reflects an underlying shortage of top-end prime country property.
"It is worth noting that the houses in our index are among the best in their class and price reductions of 25% or over may be needed to secure sales of properties that do not score at least eight of 10 against purchasers’ expectations. Drops of this magnitude will be a bitter pill for some vendors to swallow, but are necessary to get the market moving again. The good news is that we are getting closer to the bottom of the market.
"Many of those working in the banking and finance sectors, which have been hard hit by the credit crunch, live in the Home Counties. So it comes as no surprise that this is where values have been hit hardest – by over 20% in some areas. Conversely, Scotland has seen the smallest fall, with average values dropping by just over 11.5%."
Rupert Sweeting, Knight Frank’s head of country department said: "Last year was, without doubt, one of the most difficult the market has ever faced, but there are signs that some confidence is returning to buyers – 2009 will not be easy, but vendors are now far more realistic and accept that prices have already fallen quite significantly.
"Correctly-priced property continues to attract buyers and even competitive bidding in many cases. People are telling us that they cannot put their lives on hold indefinitely and the tangible assets of bricks and mortar are beginning to look more attractive compared with the increasing volatility of stock market investments and minimal returns from cash deposits.
"Price falls this year will be more limited than in 2008 and the market for the best properties will flatten out soon. There is still a very limited supply of ‘best-in-class’ houses and having found their ideal property purchasers will be keen not to lose it. After all, a house costing millions of pounds is a once-in-a-lifetime purchase for many. Nobody rings a bell when the market hits the bottom so those who hang on too long may lose the house of their dreams."
When will house prices hit the bottom of the market? Tell us what you think using the comment section below