July 1 (Bloomberg) -- Luxury-home prices in central London, the world's most expensive location for prime real estate, fell for a second month in June as sales slumped, Knight Frank LLP said.

The average price of houses and apartments in London's nine most expensive neighborhoods fell 1.7 percent in June from a month earlier, Knight Frank said today in a statement. That cut the annual increase to 7.5 percent, down from a peak of 38 percent in August.

``There can be no doubt that even property in prime central London has been hit by the double whammy of the credit crunch and wider concerns over the global economy,'' said Liam Bailey, Knight Frank's head of residential research, in the statement.

Demand from the 300,000 bankers and others employed in financial services, which has underpinned the luxury London housing market, has dropped on concerns about job cuts and lower bonuses. Knight Frank said prime residential sales in London are down 60 percent from last year.

London is still better off than the rest of the country. Curbed lending by banks and higher borrowing costs caused U.K. home prices to decline 6.3 percent in June from a year earlier, the largest drop since November 1992, mortgage-lender Nationwide Building Society said today.

Prices of London homes costing less than 1 million pounds fell 2.3 percent from May, reflecting buyers' dependence on mortgages to finance their acquisitions, Bailey said.

Largest Houses

The one part of the London market least affected by the decline are homes costing more than 10 million pounds. While prices for these properties fell for the first time in three years on a monthly basis, values are still 23 percent higher than a year ago, Knight Frank said.

``The market for super prime properties is relatively untouched by the gloom elsewhere, driven by international buyers enriched by the commodities boom,'' he said.

Lakshmi Mittal, the world's fourth-wealthiest man, paid 70 million pounds for a house in Kensington Palace Gardens, his third home in the British capital, the Evening Standard reported last month. He bought the home for his son Aditya Mittal, the 32-year-old finance director of ArcelorMittal, the world's largest steelmaker, according to the newspaper.

Kensington is one of the nine districts where Knight Frank compiles its monthly index. It also uses appraised values of representative properties in Mayfair, St John's Wood, Regent's Park, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank neighborhoods of London.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

Last Updated: July 1, 2008 13:11 EDT