LONDON MARKET:IT'S NOT SO much that the market has fallen that shocks us as the speed at which it has plunged. A year ago we were asking ourselves: "Will it, won't it?" and the smart money was on a wobble; this month, the Halifax Bank announced a 15 per cent drop in house prices in the past 12 months.

Now that sounds bad enough but, mark me, it is just the tip of the iceberg in a whole Antarctic of property gloom. For one thing, the 15 per cent stat disguises just how dire it is if you are trying to sell a home in the UK at the moment.

Nothing is selling. Sales are down more than 90 per cent year-on-year - an eye-watering 98 per cent in August making it almost impossible to say what a property is worth. As one estate agent told me, a downturn in prices does not spell disaster but a downturn in volume is killing them. Currently 150 agencies are closing offices each week.

During the giddy days of the 2007 peak of the boom, only the real dross was up for grabs - the ex-rentals that had been kicked about and bodged, the houses on busy roads and so on.

Fast forward 18 months and the only stuff that is coming close to selling is the really perfect, the absolutely flawless - the sort of homes that, if they had been marketed during the boom, would have been fetching a huge premium when compared to the damaged goods that were on offer. So, if it was mostly the shabby and compromised that was coming to market during the peak and only the truly fabulous that is selling now then the price differential has to be more than 15 per cent because it's not comparing like for like.

Anecdotally, at least, 25-30 per cent seems to be nearer the mark. Add in inflation of another 5 per cent or so for all other costs excluding house prices and suddenly those Halifax figures seem laughably undramatic, even welcome.

But, rather than put us off property, the nightmarish statistics have made the British even more obsessed with house-buying because everyone has decided that they are going to bag a bargain "when we get to the bottom of the market".

But, as no one can call that, we just sit and watch everyone else, crowing madly if anyone does dare to put in an offer for such capricious motives as a job relocation: "What? Only 30 per cent under guide? You're mad, I would have gone in at least 40 per cent under and made them pay the stamp duty."

While they wait to hit the bottom - and several reports from the likes of Savills and Knight Frank suggest that that will be at least nine months away - buyers are having some fun. It seems we have turned into a nation of Lady Bracknells when it comes to viewing houses. Agents that I have spoken to over the past couple of months have been given the following reasons why houses on their books have failed to measure up: kitchen worktops were the wrong sort of granite; the garden had too many trees; the house was on a bend in the road.

So, just as the boom was a period where a feverish lack of reality became mandatory to keep up with the sheer thrust of the property market's throttle, the downturn has become unreal for entirely the opposite reasons: before we were prepared to accept compromise - far too much compromise in my opinion - now we will countenance none at all.

Even a laughably low asking price will only tempt us through the door, it will not make us buy. (And, as everyone seems determined to put in offers 30 per cent below asking, no matter how reasonable the guide, you do wonder if agents wouldn't be better off just keeping the price quiet and asking buyers to guess how much they think it should be.)

The government's response to the housing downturn has been muted: Britain desperately needs an upturn in house prices to deliver our much-missed feelgood factor but the government is aware that rising house prices do not mean good news for everyone. On the one hand, it is faced with a downturn which has brought the building industry to its knees and will see hundreds of thousands - possibly millions - of homeowners pushed into negative equity.

Just asking around your London mates will give you some idea of how many hocked their homes up to the rooflights in order to live the life that they thought they deserved rather than the one they could afford.

On the other, it has a generation of people unable to afford house prices unless they fall quite a bit more and the banks decide they want to be our friends again. Its solution? To raise the zero-rate stamp duty threshold to £175,000. For one year.

And as for yield over capital gains, well, the well-known adage of "crisis" and "opportunity" being the same word in Chinese has unexpectedly come back to haunt us. When house sales first began to falter, the lettings market took off, especially in London where we all fancy ourselves as wheeler-dealers. Now that opportunity for rentals has turned into a crisis as the market has become bloated by owners renting out their unsellable properties (these people have even been given a nickname: "accidental landlords") and rents are, ahem, very "negotiable" as a result.

So, can I give you any good news from this side of the Irish Sea? Well, the super-prime market seems still to be in fine fettle - I am off to visit a £45 million house this week - although one Mayfair agent told me its days of ludicrous over-performance are numbered: "No one wants to be the last buyer to pay £10 million above asking, even among the super-rich," he explained.

For those of you in it for the (very) long term, there still is a housing shortage in Britain which means a judicious choice of location could be profitable in the next decade or so. And for any of you that sold up at the peak, this is a great time to re-enter the London market: prices are down and can be pushed further by a bit of hardball negotiation; the euro is at an all-time high against sterling and cannot remain that way forever (we hope). C'mon, make some Londoners happy.