London luxury-home prices had the second-biggest decline on record last month 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 (US$1.4 million) in London’s most expensive neighborhoods fell 3.7 percent from a month earlier, Knight Frank LLP said in an e-mailed statement yesterday. In the past 12 months, prices have slumped 21 percent, the biggest annualized 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 in the statement. “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 percent since the market’s peak in March. The biggest drop since the broker started the survey in 1976 was 3.9 percent, recorded in October.
Financial services companies in London may cut as many as 60,000 jobs in London by the end of next year, research firm Oxford Economics said. As a result, the market won’t rebound anytime soon, Knight Frank said.
“Price falls should begin to level out towards the end of 2009, although 2010 is likely to see prices move sideways at best,” Bailey said.
Knight Frank expects prices to fall as much as 35 percent from their peak, compared with its previous estimate of 30 percent.
House prices across the UK fell 1.3 percent last month from the previous month and about 17 percent on an annual basis, Nationwide Building Society, the UK’s largest customer-owned mortgage lender, said on Thursday. The report covered all types of homes.
London isn’t the only prime residential property market to lose value because of the credit crisis. In the Hamptons, the New York seaside resort, median prices were at US$690,000 last month — 14 percent lower than a year earlier, New York property appraiser Miller Samuel Inc and broker Prudential Douglas Elliman Real Estate said.
London-based Knight Frank compiles its monthly index from estimated values of properties in the Mayfair, St John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank neighborhoods of London.
In related news, a survey released on Friday said that British consumer confidence fell to its second lowest level on record last month as people fretted about the deepening recession and grew increasingly worried about their own finances.
The GfK NOP index fell four points to minus 37. That was lower than at any point during the recessions of the early 1990s and 1980s and the weakest since the record low last July when oil prices were at record peaks and interest rates were much higher.
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