The Knight Frank Prime Central London Index for August indicates that prices are continuing to decline, but more slowly than in July.

Prices of luxury property in central London fell by 0.1% in August, following a drop of 0.5% in July. Declines are marginal across all price ranges, the largest being in the £1m to £2.5m sector.

The latest falls mean that the annual rate of price growth, which hit 21% in April, has softened to 16% in August.

Liam Bailey, Knight Frank’s head of residential research, said, “The key question from this point is where the market is heading in the remainder of 2010. The next four weeks will be all important, as the autumn market really begins to gear up. Early signs are promising, with a number of vendors beginning to look at asking prices – which have become, in many instances, over-inflated.

“The London economy is outperforming the UK average by some margin, with strong employment data from Morgan McKinley showing vacancies in the City and Canary Wharf markets up by 71% year on year in July, suggesting that fears of a significant correction in central London values are overdone."