Dec. 7 (Bloomberg) -- London luxury-home prices rose the least for 35 months in November, as concern about the economy deterred some buyers, Knight Frank LLC said.

The average price of houses and apartments costing at least 2.5 million pounds ($5 million) increased 0.1 percent last month from October, according to an index compiled by the London-based real estate broker.

Next year, prices will gain about 3 percent as investment bankers and hedge-fund managers get smaller bonuses, Knight Frank said. There will probably be no growth at all in ``large parts of the prime market,'' the firm said in a report. The increase for 2007 will be about 32 percent, Knight Frank said in October.

``We have seen a seller's market replaced very quickly by a buyer's market,'' the realtor said. ``Ambitious pricing has effectively ended across the prime and mainstream markets.''

Prime London properties, the most expensive in the world, jumped about 31 percent in November from a year earlier. Annual price increases peaked at 38 percent in August.

Prices increased at least 2 percent every month this year until August. The 3.9 percent advance in July was the biggest gain recorded by Knight Frank since it started compiling the index in 1976. The last time prices rose less than last month was January 2005, when they were unchanged.

Bonuses may fall as much as 16 percent this year as banks and other financial-services companies based in London cut as many as 6,500 jobs, the Centre for Economic and Business Research said in October. In previous years, about half of such bonuses were spent on real estate, causing prices to surge in Chelsea, Mayfair and other parts of the U.K. capital.

Other Assets

Bonus-earners in the city will invest only 2 billion pounds in homes next year, compared with 5.5 billion pounds this year, as they seek assets that offer higher returns, Savills Plc estimates. Savills and Knight Frank are the biggest brokers for prime London properties.

Prices paid for houses and apartments costing more than 6 million pounds may, in some cases, climb as much as 10 percent next year, Knight Frank said.

``A growing range of international buyers are supporting the top end of the market,'' the firm said, citing demand from commodity-rich countries such as Russia and Kazakhstan, as well as the Middle East.

Britain is home to about 68 billionaires, according to the Sunday Times' 2007 Rich List. Many are investors from China, India and Russia who have bought homes in London to benefit from the city's schools, stores, theaters and restaurants.

Home on The Mall

Brothers Sri Hinduja and Gopi Hinduja, who own Mumbai-based Hinduja Group, last year paid 58 million pounds for a 60-room home on The Mall, the avenue running from Trafalgar Square to Buckingham Palace, according to the Sunday Times.

Planned changes to the tax rules may make London less attractive to wealthy foreign buyers, the group that has done most to raise prices of prime property, Knight Frank said.

Super-prime properties can fetch as much as 4,000 pounds a square foot, CB Richard Ellis Hamptons International estimates. That compares with 2,075 pounds a foot in New York, the broker said.

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

Last Updated: December 7, 2007 04:12 EST