Random Musing: London house prices

An article in today’s Guardian says that London property prices are falling. In fact they fell over 5% in a single month.

Asking prices in London fell 5.3% in August, according to the Rightmove house price survey – equivalent to a £21,000 drop in a single month. Prices in some of the most sought-after suburbs are falling much lower. The average asking price in Wandsworth fell from £522,000 to £481,000 in a single month – or 7.9%. Homes in Brent, Kingston-upon-Thames, Richmond-upon-Thames and Greenwich were down more than 6.5%.
–Guardian, 18 Aug 2008

I lived in London until 2000 when I sold my flat and moved to New York City. At that time, the flat had increased in value by 134% since 1987. Later, in 2005, I saw that the flat was again for sale for 72% more than in 2000. So, in 18 years, through a major recession and property fall and a subsequent surge in prices, the same flat had increased by a staggering 303% in value.

Was this not the obvious sign of an unsustainable bubble? And how much will prices in London fall? My own view is that we have a long way down still — perhaps another 20-30%.