Prices of Luxury Homes in UK Tumble; First Since 2003

The prices of luxury properties in central London tumbled for the first time after five years as buyers feared to make big decision due to the looming recession of the UK economy.

Prices Continue to Decline

Knight Frank LLP compiled prime property indexes and showed that prices of houses, and apartments in prime parts of London dropped by 1.6 percent.  Since July, the value of properties has been declining by 1.3 percent and brokers said it is the fourth consecutive drop for homes with 1 million pounds price tags.

Buyers were discouraged by the bleak outlook in the financial and service markets.  The pessimism resulted to lowering demands for property by bankers and those employed in financial institutions.  This sector has fueled the property frenzy in London which is absent today as job cuts became more widespread due to the collapse of the international sub-prime mortgage market.

It is estimated that the prices of prime residential lots in locations in or around London dropped by 46 percent compared to the figures posted last year.  The property slump is not limited in the general London area as prices of properties in other parts of the country significantly dropped also.

A 10.5 percent nationwide property price decline has been recorded for the month of August.  This is the fastest decline ever experienced by UK real estate in almost 20 years.  Prices of houses also fell by 1.9 percent compared last month.  The drop this August is the tenth consecutive price tumble experienced across the UK.  

…as Posh Houses Sale Go Up

Properties valued at 10 million pounds or more however experienced growth as it gained 2.9% from July to August.  The luxury property market has been boosted by purchases from wealthy foreign investors.  This sector of the market seemed not affected by the general decline of real estate in London.  As a result, the gap between the luxury property sector and the rest of the market is widening.

Victor Pinchuk, a Ukrainian billionaire, bought a prominent five – story townhouse building in Kensington.   According to reports the sale was made as early as February but Pinchuk never confirmed the reports if they were accurate.

In June, GLG Partners Inc. sold a home to Lakshmi Mittal at the posh street in Kensington Palace Gardens for 70 million pounds.  Mittal is the fourth wealthiest man in the world.  The house will be given to Mittal’s son, Aditya, after it has been refurbished.  

Southeast England and Central London account for the majority of million pound houses sold in 2007.  The data was released by HBOS Plc which it compiled from government statistics.  Million pound properties and houses represent 0.6% of all real estate transactions in 2007 which was pegged at 1.38 million successful sales.