Finance Blog number 1

London luxury-home prices fell for a fourth consecutive quarter leading to an increase in sales, Knight Frank LLP said.

The average value of homes costing more than 1 million pounds ($1.4 million) in London’s most expensive neighborhoods dropped 6.7 percent in the first quarter, the London-based property broker said in a statement today. The annualized decline in March was 24 percent, the biggest since Knight Frank started compiling the index in 1976.

Job cuts by financial-services companies contributed to the decline. House prices across the U.K. fell 18 percent in the year through February, the biggest drop since at least 1983, according to mortgage lender Halifax, a unit of Lloyds Banking Group Plc. For buyers outside the country, the pound’s depreciation against the dollar and the euro made real estate in areas such as Mayfair cheaper, Knight Frank said.

“The increased activity may be an early sign of a turnaround,” Richard Snook, senior economist at the Centre for Economics and Business Research Ltd., said in an interview. “Housing affordability is very good compared with what it was 12 months ago.”

An estimated 250 house and apartments costing more than 1 million pounds were sold in central London last month, up from about 200 a year earlier, said Liam Bailey, head of residential research at Knight Frank.

Mayfair

“Mayfair has been a particular beneficiary of the weakness of Sterling, with foreign buyers comprising almost 60 percent of the market,” he said.

The pound has fallen 27 percent against the dollar in the past year and 14 percent against the euro.

Viewings by potential buyers jumped 38 percent in March from a year earlier. The number of properties put up for sale in the month slumped 42 percent compared with March 2008 business card.

“The key issue to hit the prime London market at the current time is the growing shortage of stock,” Bailey said in an interview. “The number coming onto the market is drying up because people don’t want to accept the prices on offer.”

A four-story, four-bedroom house that Knight Frank is marketing in Chelsea for 2.55 million pounds was put on sale almost a year ago for 3.3 million pounds.

Slashed Prices

In the same district, Knight Frank has cut the price of a five-story house by 17 percent to 2.45 million pounds.

The first-quarter price decline of 6.7 percent compared with a slump of 9.4 percent in the final quarter of 2008 and a gain of 1.8 percent in the first quarter of 2008, Knight Frank said.

Prices are falling as bankers, the main buyers of luxury homes in London, worry about losing their jobs. Financial companies may cut as many as 60,000 jobs by the end of 2010, according to research firm Oxford Economics.

Knight Frank compiles its luxury index from estimated values on properties in the Mayfair, St. John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank neighborhoods of London.

The company expects luxury prices to level out this year at about 35 percent less than their March 2008 peak and remain little changed at best in 2010.

Knight Frank’s index, which started at 100 in 1976, fell to 3,652.2 last month, down from a record 4,796.6 a year earlier.

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