Dip is the first in 16 months as recovery persuades more owners to sell
(LONDON) Luxury-home prices in central London declined in July for the first time in 16 months as the recovery persuaded more owners to sell, broker Knight Frank LLP said.
Prices of properties costing at least £1 million (S$2.1 million) fell 0.5 per cent from June, the London-based real estate adviser said in an e-mailed report yesterday. They rose 17 per cent from a year earlier, the smallest gain since February.
Values have climbed more than 23 per cent since a yearlong price slump ended in March 2009, boosted chiefly by overseas buyers encouraged by a weaker pound. The British currency's 6.3 per cent appreciation against the euro this year has reduced demand from Europeans, while owners are becoming too optimistic about the prices their homes will fetch, the broker said.
'Expectations of vendors are still very high after the rise in prices,' said Andrew Giller, who heads London property searches for The Buying Solution, an arm of Knight Frank that advises and acts for wealthy buyers. 'People have been rejoicing slightly too early.'
The luxury slowdown mirrors the broader UK housing market. Liam Bailey, Knight Frank's head of residential research, predicts that a drop in the second half will cut the 2010 gain for luxury homes in central London to 5 per cent.
Sale prices of residential property in England and Wales rose 8.4 per cent in June from a year earlier, down from the 9.7 per cent annual gain in the previous month, according to Land Registry figures released on July 28.
Mr Bailey estimates that some sellers are overpricing luxury homes by as much as 10 per cent. Another sign of 'over-ambitious pricing' is that sales are achieved at 95 per cent of the asking price, down from 97 per cent in May, he said.
The number of luxury properties for sale has increased by 7 per cent since May, while the higher costs of purchasing a home in neighbourhoods such as Chelsea, Belgravia and Kensington caused the number of buyers to fall 8 per cent, the broker said.
Some potential purchasers have chosen to rent instead, lifting rents for prime homes in central London by 9.2 per cent in the second quarter from a year earlier. The number of prime rental homes fell 64 per cent in the past two years as owners decided to sell, Knight Frank research shows.
Properties priced at £3 million to £5 million were most affected by July's drop in values after they had the biggest gains in the past 15 months.
Overall, values are still 6.1 per cent below the March 2008 peak, the broker said.
Knight Frank compiles its luxury-homes index from estimated values of properties in the Mayfair, St John's Wood, Regent's Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and South Bank neighbourhoods of London. -- Bloomberg
Source: Business Times, 3 Aug 2010