London house price rises slow

House price growth is slowing in London, with average prices up by 2.1 per cent in August, down from 3.9 per cent in July, according to new research.

The annual rate of price increases fell from 37.9 to 36.4 per cent, according to estate agent Knight Frank.

The organisation predicts the average rate of growth will slow from around 36 per cent to nearer 30 per cent by the end of the year.

However, even this slower rate is still slightly ahead of the 29 per cent annual growth recorded in December 2006.

"Despite the financial market problems over the summer, we remain positive in our outlook and expect to see growth next year in central London hitting double digit levels - although only just," commented Liam Bailey, head of residential research at Knight Frank.

"We anticipate that the price of prime property in central London will rise by ten per cent through 2008.

"Growth will be led by the super-prime market - £5 million plus - and by the sub £1 million market, where there is a degree of “catch up” beginning to take place."

While house price growth has been led by houses rather than flats over the previous year, this saw a reversal in August.

Flats recorded price growth of 2.3 per cent, while houses saw only a 1.9 per cent increase.

The postcode district SW10, which includes Kensington and Chelsea, saw the fastest level of growth with prices rising 4.1 per cent.

This was followed by big prices increases of 3.9 per cent in W1, which contains Mayfair and Soho.