London's Luxury Property Market Cooling Off
After a long run of price increases and gaudy sales, the luxury London market is slowing down, new data shows.
In September, the average price for a home in prime central London declined for the third consecutive month, according to the latest Knight Frank Prime Central London Index. In total, the index has fallen 0.7 percent since June.
That may not sound like crushing news, relative to activity in other markets. But London has been on a run of big sales, fueled primarily by buyers from Asia, Russia and the Middle East.
Prices in prime London are still 15 percent higher than a year ago and 23 percent above the low set in March, Knight Frank reports.
"The London market has certainly felt the benefit of the weak pound, which has drawn in more overseas buyers, and more importantly very low mortgage rates--which have encouraged new purchaser activity," wrote Liam Bailey, Knight Frank's residential research director.
Nevertheless, there are landmines in the market, the report notes. The supply of properties for sale is increasing, while the number of new buyers is shrinking, data shows.
The prices decreases, while nominal, "provide a warning to potential vendors regarding setting asking prices," according to Bailey. The danger ahead, he wrote, is "overly ambitious pricing."
"Most agents feel that asking prices are currently 5 percent to 10 percent above realistic levels and until vendors move to address this issue the market will be slow in terms of the numbers of sales achieved," Bailey said.