London Luxury-Home Values Declined Most Since 1976 in October

By Simon Packard

Nov. 1 (Bloomberg) -- Luxury-home values in central London, the world's most expensive location for prime real estate after Monaco, fell the most in 32 years in October because of the crisis in financial markets.

The estimated average value of a house or apartment in the city's nine most expensive neighborhoods fell 3.9 percent from September, according to an index compiled by Knight Frank LLP. It was the biggest drop since the index was started in 1976. Property values declined 10.8 percent from October 2007, the property broker said. The index covers homes mostly valued at about 1 million pounds ($1.62 million) or more.

The stalemate over price between buyers and sellers may be easing, the adviser said, as the worst banking crisis since World War I drives the U.K. economy into a recession. Demand has collapsed as bankers and others employed in financial services face job cuts, lower bonuses and higher borrowing costs.

``An increasing number of vendors have decided to cut prices to achieve a sale,'' said Liam Bailey, Knight Frank's head of residential research, in a statement. ``Until the summer many were holding to their pre-crunch asking prices.''

The decline showed central London's luxury residential market caught in sliding values affecting the rest of the U.K.

Prices for British homes declined 14.6 percent in October, the fastest annual rate in at least 17 years, Nationwide Building Society said two days ago. Prices of houses and apartments fell 1.4 percent from September, the 12th consecutive drop, Nationwide said.

London and southeastern England accounted for more than three quarters of sales of million-pound homes last year, according to an index compiled from government data by HBOS Plc. Million-pound homes represented 0.6 percent of the 1.38 million U.K. property transactions last year.

Knight Frank compiles its monthly index from appraised 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.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.