Soaring prices during the boom prevented many buyers from getting into areas such as Notting Hill, Clapham, Blackheath and Chiswick. They settled instead for fringe areas, such as North Kensington, Shepherd's Bush, Brixton, Catford and Acton, aiming to move closer to their real targets as prices rose. Now they are stuck.
Property values have dropped by 20 per cent in prime areas, so newcomers can buy homes that were beyond the reach of the previous generation. Lack of interest in the fringes has dragged values down as much as 50 per cent, so even if owners find a buyer, they often cannot sell because the price would be less than their mortgage.
Studio flats are ignored by many first-time buyers who can now afford one or two-bedroom properties. This has affected even smart areas such as Bayswater, where small flats are common. Giles Hoskins, of Winkworth, cites one repossession he has been asked to sell at a little more than pounds 38,000. 'Three years ago it was on the market for pounds 75,000,' he says.
This picture is repeated across the capital. Problems could hang over owners for years in areas such as Colliers Wood, Norbury, Catford, Brixton, Harlesden, Wembley, Tottenham, Stoke Newington, East Finchley, Hornsey, Harringay, Finsbury Park and Palmers Green.
Even in a good market, these kinds of areas had more homes than buyers. Now interest is almost negligible, Simon Agace, chairman of Winkworth, says.
Prime areas are propped up by prestige and timeless popularity. In hard times, owners stop selling, which prevents supply exceeding demand. The obvious locations include Hampstead, Holland Park and St John's Wood. In addition, parts of Pimlico, Fulham, Chiswick, Blackheath, Old Islington, Highgate, Kentish Town, Putney, Hammersmith and Hackney are prime areas.
In between are 'secondary' zones, which lack the charisma of the best locations, but boast reasonable transport links, property, shopping and schools. If purchasers cannot afford prime areas, they will move to places such as Tooting, Battersea, Streatham, Camden Town, central Wimbledon or Kennington.
In Chiswick, for instance, values are down 25 per cent since the boom, but in neighbouring Shepherd's Bush and Brentford, they have fallen by up to 40 per cent.
On the other side of London, Catford is as cheap as anywhere in the capital after sliding 50 per cent since 1988, but the market is effectively dead. New buyers will go straight to Blackheath, where values are down 25 per cent. Deptford, where four-storey Georgian homes are being offered for half the pounds 200,000 they reached in the boom, is also falling further behind Blackheath, where big houses are selling for as much as pounds 700,000.
Fear of missing the boat drove many buyers into these fringe areas, but fashion was also a strong motivation.
'A lot of people moved into seedier parts of Deptford because it was arty,' Simon Coan, of Winkworth, says. 'They won't care that it has gone so far down in value, because they had no intention of moving upwards.'
In 'south Clapham' - more accurately known as Brixton - the picture is the same. 'Three girls fought tooth and nail to buy a maisonette for pounds 110,000 when the market was hot. We resold it six months ago for pounds 75,000,' Mr Coan says.
A few streets north of the railway station in 'real' Clapham, prices have fallen only half as much as in Brixton.
Maida Vale was also judged up- and-coming by the yuppie brigade, says Mr Coan's colleague Richard Woolf. 'It reached ridiculous levels when the Church Commissioners were selling off property that was then converted into flats. People would buy virtually anything, paying as much per square foot as St John's Wood.'
Now prices have fallen 35 per cent, yet just across the Edgware Road in St John's Wood, values have dropped 20 per cent. A four- bedroom garden flat in Little Venice would have gone for pounds 450,000 in the boom; now it would be lucky to reach pounds 300,000. The same kind of property in Hamilton Terrace, St John's Wood, could reach almost pounds 400,000.
Sorting out the permanent shadows from passing clouds is not easy, however. Central Islington clings to its prime status through the attractions of shops, restaurants and a general charisma, yet prices have collapsed as much as 30 per cent. This is because they soared so high in the boom and the area became infested with shoddy conversions.
Even within the best zones prices have performed differently. While Battersea prices are down by 30 per cent overall, homes between the park and Clapham Common have suffered only half that drop. Anyone lucky enough to have a home overlooking greenery will also suffer less. A three-bedroom house would fetch pounds 160,000 - almost 25 per cent more than those set back from the commons - because they attract buyers more easily.
Is there a lesson in this for potential buyers? Mr Agace says: 'The last few years have shown that fundamentals are crucial when choosing property.'
The safest bets are areas with the best transport links, the highest-quality housing and the richest supply of parks, shopping and good schools. 'But they will also have the highest prices and the least property for sale, as people are reluctant to move out,' he says.
Secondary zones offer the best value, because they are almost as well served and while prices have fallen, they are likely to rise again. The secret is choosing the right spot. Primrose Hill, for example, has strong claims to become a prime area; Golders Green, on the other hand, is too close to Hendon, Finchley and the North Circular to make the jump. Islington prices still have further to fall.
Perhaps the simplest message comes from Richard Woolf. 'Don't be a pioneer. You can pay a heavy price if you guess wrongly.'