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The recovery in the central London housing market appeared to have run out of steam today after a sudden drop in the price of the most expensive homes.
The value of properties costing at least £1 million fell by 0.5 per cent last month, according to estate agent Knight Frank. Mayfair was the only part of central London where prices rose - and even then only 0.2 per cent.
It was the first decline since March last year when the recession was at its deepest and brought a 15-month rally in bricks and mortar to a halt.
Prices are now 6.1 per cent below their March 2008 peak — too high for cautious buyers worried about the economic outlook.
Liam Bailey, head of residential research at Knight Frank, said: “The slowdown in the London market has been anticipated for several months. The bounce in pricing on the back of low interest rates and weak sterling had driven prices close to peak levels and in some cases above these levels.
“The market experienced a severe lack of houses for sale during late 2009 and early 2010, which helped to push prices higher. Since May demand has fallen back and supply has also risen as sellers look to take advantage of higher prices.”
The worst hit area was Kensington, where prices fell by two per cent in July, followed by Knightsbridge, down 0.7 per cent and Hyde Park, where values fell by 0.4 per cent.
The healthiest part of the market was the very top end, with prices slipping just 0.2 per cent in the £10 million-plus category. The weakest market was for £3 million to £5 million homes, where the biggest rises have been over the last 15 months.
Bailey said: “We believe that our forecast for around five per cent price growth in central London for the whole of 2010 will be borne out, which suggests that prices will fall by around 3.2 per cent during the final five months of the year.”
Reader views (5)
The only reason London property prices have risen is overseas investment, without it they would have fallen as dramatically as the rest of the country. Property prices are still to fall further, with the credit available from banks still at an all time low prices are still unsustainable
- Adam, Epping, UK, 03/08/2010 16:26
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Middle to high rage up 4% by EOY. Watch this space.
You can't "dramatise" the housing market down guys - not when it just keeps going up. How many times has this been reported? How may times wrongly? Every bloody time.
- trip hazard, cambridge, 02/08/2010 18:00
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We'll never be able to build enough houses fast enough! Population reports forecast that Britain will increase its population by 24% by 2050! Despite our comparatively small landmass, we're set to overtake the populations of France and of Germany. If we start now, by concreting Britain over and building high-rise from Land's End to John O' Groats, we might have some prospects of housing a small portion of our population to be explosion.
- S R Dean, The Stews, 02/08/2010 16:32
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One day prices are up, the next day prices are down; and so the merry-go-round continues.
Just build more houses, then everything will be equal.
Houses are like cars; second hand ones should be cheaper.
But if we don't build any more houses; all houses will become like vintage cars, over priced and had to find parts for.
- mickinlondon, london, 02/08/2010 15:36
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We think central London house prices will rise strongly in the final 5 months as increased evidence of a strong economic recovery (despite the much feared austerity) increases the confidence to borrow and lend; and those waiting for house price falls capitulate. In addition, the concensus view among housing market commentators is for flat or falling prices for the remainder of the year and the concensus is very rarely right. The negative news is already priced into the market, so the only way is up!
- BIGbleu, BIGbleu, London, 02/08/2010 14:54
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