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London luxury market takes a hit

Capital suffers its smallest annual increase since 2009, with Knightsbridge prices actually falling

PUBLISHED : Wednesday, 05 June, 2013, 12:00am
UPDATED : Wednesday, 05 June, 2013, 4:40am

Luxury homes in central London had the smallest annual increase last month since December 2009 on a decline in the Knightsbridge area, the site of Christian Candy's One Hyde Park complex, Knight Frank said.

The average price of a house or apartment in the city's most-expensive neighbourhoods climbed 7.2 per cent from a year earlier, according to data from the London-based broker.

The monthly increase of 0.3 per cent was the smallest since December and Knight Frank said it expects little change for the whole of this year.

The market for luxury homes in London is cooling at a time when prices for less expensive properties are picking up, helped by a credit-boosting programme by the Bank of England and the UK Treasury.

While demand for prime real estate remains strong, Knight Frank said would-be buyers of homes valued at as much as £2 million (HK$23.6 million) are becoming more price sensitive.

"There is a discernible shift in the market," said Liam Bailey, head of residential research at the London-based firm, in a report.

Anecdotal feedback confirms "that buyers are willing to agree to purchases, but only when prices are realistic", he added.

In Knightsbridge, one of 14 London neighbourhoods covered by the report, property values fell 0.3 per cent last month from April. In Belgravia, there was a 0.2 per cent decline.

Knightsbridge is home to Harrods department store, the Royal Albert Hall and One Hyde Park, the luxury apartment project developed by Candy's CPC Group as part of a venture with closely held Waterknights.

CPC won approval in March for 165 apartments at Sugar Quay in the City of London financial district, where homes on the area's fringe rose 2.6 per cent last month, the most in the heart of the British capital for the period.

Prime central London rents were unchanged in May from the previous month, the first time rates had not declined since June last year, the broker said in a separate report.

The monthly cost of leasing a home in Kensington, a district popular with bankers and hedge fund managers, has risen 2.6 per cent in the year to date, the most in central London.

Rents had declined 2.9 per cent in the 12 months through May, driven by job losses in the financial-services industry, Knight Frank said.

Britain's four biggest banks will have cut about 189,000 jobs by the end of this year from their peak staffing levels, bringing employment to a nine-year low amid a dearth of revenue, according to Bloomberg data.