LUXURY home prices in London rose at the fastest monthly rate since real estate broker Knight Frank LLC began tracking them 31 years ago

LUXURY home prices in London rose at the fastest monthly rate since real estate broker Knight Frank LLC began tracking them 31 years ago, suggesting the most expensive properties remain resilient to rising interest rates.

The average price of the costliest houses and apartments in the British capital gained 3.1 percent in June after May's 2.5 percent increase, a monthly index compiled by London-based Knight Frank showed. Prices advanced almost 35 percent from June 2006, the biggest annual gain since mid-1979.

A shortage of available luxury homes has caused prices to appreciate for the past 18 months, as investment bankers and hedge fund managers look to invest record bonuses. They have been competing with wealthy individuals from Russia and the Middle East attracted to London for its amenities and favorable tax treatment.

"Much of this growth is concentrated in the very upper ends of the market," said Liam Bailey, Knight Frank's head of residential research in a statement. He revised up his forecast for the full year, predicting that luxury home prices will gain 25 percent, rather than 20 percent.

The surge in value of the most expensive properties is in contrast to the rest of the British property market, which has shown signs of cooling after five interest-rate increases by the Bank of England since the start of August, Bloomberg News reported.

UK house prices rose at the slowest pace in almost 1 1/2 years in June as higher borrowing costs deterred potential buyers, the Royal Institute of Chartered Surveyors said on Thursday.

Properties priced at more than four million pounds (US$8.1 million) rose 43 percent from June 2006, while homes selling for less than one million pounds gained just 1.6 percent in the 12 months, Knight Frank's Bailey said.