Prices of prime central London property fell in July by 0.5 per cent, the first monthly decline since March 2009, as demand for high-end property declines.
According to the Knight Frank Prime Central London Index, prime central London prices are now 6.1 per cent below the peak of the market in March 2008.
Property prices have rebounded strongly in prime areas, with prime London experiencing 15 consecutive months of price rises driven by strong international demand. Despite last month’s fall, prime London prices are still 23.4 per cent higher than they were at the bottom of the market last March.
“The slowdown in the London market has been anticipated for several months,” said Liam Bailey of Knight Frank.
“The market experienced a severe lack of houses for sale during late 2009 and early 2010, which helped to push prices higher.”
Since May, demand has fallen back by 8 per cent while supply has also risen - up 7 per cent - as vendors look to take advantage of higher prices.
The Index showed that price falls had occurred across the capital with the exception of Mayfair which posted a 0.2 per cent growth.
The healthiest parts of the market are the entry level end and the very top end, with prices only slipping by 0.2 per cent in the sub-£1m and the £10m plus markets. The weakest markets are the mid range £3m to £5m sectors which had seen the biggest price rises over the past 15 months.
Bailey said the main problem facing vendors in the capital is over-ambitious pricing on stock which in some cases means that asking prices are between 5 per cent to 10 per cent higher than buyer expectations.
Knight Frank said it still maintained its forecast of 5 per cent growth for central London during 2010. It therefore believes prices will fall by around 3.2 per cent during the final five months of the year.