The world’s most expensive location for prime real estate behind Monaco, Central London has seen luxury home values fall for an eighth month. Such locales include Mayfair, St John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank neighborhoods of London.
As recently reported by Bloomberg, in November the approximate average value of a house or apartment in the city’s nine most expensive neighborhoods fell 3.6 percent from October, according to an index compiled by Knight Frank. This represents the second largest drop since the index started in 1976. Furthermore, the figures show that property values declined 14 percent since the previous year.
Why is this? Quite simply, vendors are not holding out for emotional prices and are accepting that price reductions have to occur for a sale to be achieved.
Prime Central London real estate has taken longer to register declines seen elsewhere in London because of a standoff between sellers and buyers over price. That ended in September, when the bankruptcy of Lehman Brothers Holdings Inc. caused demand to collapse from those employed in financial services, traditionally the mainstay of demand for expensive homes.
Unsurprisingly, the worst banking crisis seen since the First World War has translated into job cuts and reduced bonuses, and in London it’s likely to get worse before it gets better, with as many as 62,000 finance-related jobs forecast to be lost in London by the end of next year.
Interestingly, the properties least affected by the fall in values are those worth more than five million pounds. With the pound sliding it becomes more attractive to wealthy overseas buyers (yes, they still exist) and given the uniqueness of many of the properties in this category, and how infrequently they come onto the market, they still are highly sought after.
Appreciating that for a buyer with US Dollars, a 15 percent property valuation drop equates to a 35 percent slide when exchange rates are taken into consideration, property in excess of five million pounds is great buying.