London’s Luxury Homes Sell at the Fastest Pace Since July 2007

London’s luxury homes this month sold at the fastest pace since the market started to slide more than two years ago as overseas buyers took advantage of a weakening pound, Knight Frank LLP said.

About 250 homes and apartments costing more than 1 million pounds ($1.6 million) were sold during August, compared with about 75 a year earlier, said Liam Bailey, head of residential research at the London-based broker. Prices increased in August for a fifth straight month, reducing the annualized decline to the lowest since October.

“The combination of rising prices and increasing confidence in the central London market has had a dramatic impact on the number of sales which have taken place,” Bailey said in an e-mailed statement today.

Thousands of bankers and finance industry workers, the main buyers of luxury homes in the U.K. capital, have lost their jobs since the start of the credit crunch in 2007. Foreign buyers now account for more than 40 percent of purchases as they take advantage of the pound’s 11 percent drop against the dollar and 8.5 percent fall against the euro in the last 12 months.

Luxury home prices fell 15 percent in the five months following the collapse of Lehman Brothers Holdings Inc. in September, said Knight Frank. They have gained 4.7 percent in the past six months including a 1 percent month-on-month increase in August. Prices were down 12 percent from a year earlier, the smallest drop since October when they were 11 percent lower.

V-Shaped Recovery

“We are at the beginning of a V-shaped recovery,” said Stephen Yorke, chairman of D & G Investment Management. The company manages the 10 million-pound Prime London Capital Fund, owner of eight rental properties in Chelsea, Knightsbridge and Belgravia.

A few properties are now fetching record prices as they attract multiple bidders, James Pace, head of Knight Frank’s Chelsea office, said in the statement. “This price growth has been focused on quality.”

Knight Frank recently sold a four-story family house in the area for 15 percent more than it got for a similar property on the same street in November, said Pace.