London's luxury house prices take a tumble

London luxury home prices had the second-biggest decline on record in January as would-be buyers struggled to secure mortgages from banks hurt by the global financial crisis.

The average value of homes costing more than 1 million ($2.8 million) in London's most expensive neighborhoods fell 3.7 per cent from a month earlier, Knight Frank said. In the past 12 months, prices have slumped 21 per cent, the biggest annualised drop recorded by Knight Frank.

The sudden restriction of mortgage finance "was the main cause of the market's decline last year", Liam Bailey, head of residential research at London-based Knight Frank, said. "This factor is continuing to cause problems for the housing market and the wider economy."

The cost of buying a luxury home in the UK capital has fallen for 10 straight months, declining 21 per cent since the market's peak in March. The biggest drop since the broker started the survey in 1976 was 3.9 per cent, recorded in October.

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Posted: 4 Feb 2009

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