London property no longer looks so safe

A weakening pound "may start the unwinding of the great wall of money," said Jefferies real estate analyst Mike Prew. "A prime London asset denominated in a secondary currency loses much of its investment appeal."

YIELDS UNDER SCRUTINY

Not all agree that London property has run out of steam, citing strong lettings in buildings outside top locations.

"If this is a recession, then not only is London doing rather well but imagine the impact of any economic and financial recovery," said Investec property analyst Alan Carter.

When the investor focus turns to yield rather than preserving capital, sceptics say it is harder to make the case for London property.

Yields for some Mayfair properties are under 4 percent. They are below 3 percent for the Rolex store under the One Hyde Park luxury flat scheme in Knightsbridge. That compares to a longer term trend of about 5 percent in the wider West End district.

"We don't believe there is good value in prime central London and are selling to reinvest elsewhere," said Richard Gwilliam, head of property research at PRUPIM, a real estate investment arm of British insurer Prudential that has about 15 billion pounds ($24 billion) under management.

With signs of some half-full or vacant buildings starting to drop rents, that could also hurt values. A succession of job cuts announced by banks have added to concerns over demand.

The luxury residential market is already in something of a hiatus after rises in sales tax for the priciest homes.

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