This market, consisting of housing selling in the £5 million plus price bracket, is proving relatively immune from economic events, according to the London Prime New Homes Index report from analysts Jones Lang LaSalle.
However a continual stream of poor business and economic news is finally taking its toll on central London's prime new homes market, it says.
Until this latest quarter, the prime London market had been holding up more resiliently than other parts of the UK housing market. However, new apartment prices in prime London have fallen at a faster rate than both mainstream London and UK markets in the second quarter of 2008.
The report says that prices have fallen by a significant 6.8% during the second quarter of 2008. This follows a small 2% fall at the end of 2007 and no change in the first quarter of 2008.
But the annual rate of price growth in prime new homes in London is still positive at 3.4%. 'However, we expect this to drop quite markedly as the very strong quarterly increases last year fall out of the annual calculations,' a spokesman said.
According to analysts it is rich foreign investors who are keeping the luxury market going. Liam Bailey, head of residential research at Knight Frank, said the buyers are mostly foreigners with almost no limit on their budget. Many are making a fortune from the soaring price of oil and other commodities, he said.
But even they may be cutting back on their spending. An index of spending on luxury goods shows spending has slowed by half.
Wealth management group Stonehage says its index of luxury goods price growth in the capital has fallen from 6% to 3.3%. Luxury goods deflation is evident among several items including cars and luxury watches.
