Central London house prices slip further but recovery seen later this year

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Asking prices for houses in central London have slipped by just shy of 3 percent over the last month, according to the latest data released on Monday from the U.K.'s largest property portal, Rightmove.

However, this drop is par for the course during these summer months, says the company's director and housing market analyst, Miles Shipside, in the accompanying press release.

"Londoners value their summer breaks and when they are turning their thoughts to the beach, they seem to turn off property. Sellers who come to market at this time of year have to price keenly to attract distracted buyers," Shipside declared.

It's important to note that the Rightmove data track asking prices rather than achieved prices so is reflective of vendors' expectations. The gulf between buyers' and sellers' valuations of housing stock has been cited as a key contributor to the impasse seen in the housing market since early 2016.

Transactions in prime central London (PCL) slumped by more than 20 percent last year, according to research from the property professionals' database LonRes, but moved into gently positive territory in the first half of 2017, largely due to an overdue resetting of vendors' value expectations, says the team.

Prices in PCL have been sliding since mid-2014 on the back of multiple headwinds, notably punitive tax changes particularly targeted at higher priced estates, economic weakness in regions such as the Middle East and Russia which have traditionally supplied a hungry buyer base and prolonged political uncertainty triggered by last year's Brexit referendum.

Yet 2017 should see the beginning of a turnaround in the capital's luxury property fortunes after a 2 percent decline in PCL last year, according to estimates also released on Monday by the U.K.'s largest property services group, Countrywide.

The group estimates a 2 percent growth rate for 2017, which is set to double to 4 percent in 2018 and reach as high as 5 percent the following year.

Indeed, part of the seemingly positive momentum is simply a result of the market's downturn in recent years, according to Fionnuala Earley, chief economist at Countrywide.

"There has already been adjustment in this market and so we are seeing this level off now. Overseas investors have been buoyed by currency and other worldwide events (e.g. Iran sanctions) but, by its nature, PCL is a golden investment for prestige and we expect that to revive now," explained Earley via phone to CNBC on Monday.

"However, price growth is still very modest and falling in real terms," she added, noting the group's expectation that the market will not return to its rip-roaring race higher anytime soon, as had been experienced during the years of heady growth following the financial crisis.

While national house price growth has also shown evidence of slowing over the past year, certain headwinds remain specific to London, Lucian Cook, Savills head of residential research, told CNBC via email on Monday.

"In the capital, price growth over the past 10 years means borrowers are pushing up against the limits of mortgage regulation. That is likely to act as a further drag on house price growth in the mainstream markets across London's boroughs," he noted, highlighting the pressure of absolute valuations on the market's buoyancy.

The trajectory of the market ahead now increasingly depends on the appetite of buyers, says Cook, bringing back into focus the importance of how such buyers and their selling counterparts view the market's strength.

"At the top end, stamp duty and other taxes mean the market in central London peaked in 2014, with a return to growth now dependent on buyer sentiment as much as economic drivers," he concluded.

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