The cost of new homes in London’s most desirable locations (Kensington and Belgravia) has reached £3,597 sq ft, but the prime new homes market is finally starting to show signs of slowing, according to Jones Lang LaSalle’s latest Q3 residential report on London.

James Thomas, head of residential research at Jones Lang LaSalle, said: “We are now seeing signs of slowing following nine quarters of sustained growth and our research shows that over the last 12 months prices have risen by 33%, easing slightly from the 37% growth in values in the 12 months to the end of Q2 2007. Despite the slowing in the market, this pace of growth is in stark contrast to the wider residential market where prices are now flat or falling in some areas.”

With an expectation of a slowing in many of the large economies in 2008, in particular the US, the market is likely to be more challenging. The downturn in the performance of the financial sector has also dented confidence and will impact on the personal wealth of some purchasers.

These influences are now being felt in the prime new homes market with a slowing in sales activity, stimulating a greater willingness amongst developers to offer discounts in order to maintain sale rates. Expectations of a slowing in the market are also likely to deter speculators looking to buy off-plan.

“Our central scenario is for a continued slowing in the market. Supply remains tight and the current uncertainty will result in fewer development starts, limiting prospective buyer options. While the UK economy has weakened there are few expectations of a global recession. This will support demand for prime homes in London, which is considered relatively low risk on an international basis, albeit at a lower level. Given the recent economic weakening, we expect price growth of prime new homes to be in the region of 5% in 2008”, said Thomas.