C Citigroup Inc

LONDON—High-end London home sales in districts such as Kensington and Chelsea fell to their lowest level since 2009 after a U.K. government tax increase in April, according to real estate buying agent Huntly Hooper.

There were only 125 homes sold in prime central London in April, it said, below the 151 sales recorded during the financial crisis in January 2009,

The drop in deals follows a change in the U.K. stamp duty tax, which on April 1 tacked an additional 3% on the sale price of homes for foreign buyers and buy-to-let properties. The government changed its housing-tax regime as part of effort to address the U.K. housing shortage.

A rush in the run-up to the deadline saw 420 sales in March, above the long-term average of 310, the 10-year data set analyzed shows.

The tax increase delivered the latest blow to the prime central London market, where homes became one of the hottest global assets following the financial crisis. Foreign investors worried about political and financial instability across the world took refuge in the U.K. capital's penthouses and mansions, sending prices higher.

In the past year, low oil prices, volatile stock markets, and an element of sticker shock after years of vaulting values have all contributed to wilting demand. Buyers have also had to contend with a change in stamp duty in late 2014 that increased the cost of buying homes valued at more than £ 937,000 ($1.19 million).

With buyers cautious, prices in these districts grew just 0.5% in April from a year earlier, the lowest increase in six-and-a-half years, according to broker Knight Frank. Some neighborhoods suffered more than others; in Knightsbridge, the average house price fell 7% in April, Knight Frank said.

Prices could still fall further. The April stamp duty increase has yet to hit home values, said Oliver Hooper, director at Huntly Hooper.

"As we enter the quieter summer months, when values typically fall due to seasonal behavior, I would expect this to start feeding through," Mr. Hooper said.

The number of homes for sale is at a 10-year high, meaning buyers can generally take their time, compared with the frenzied buying seen a couple of years ago, Mr. Hooper said.

However, with homeowners in no rush to sell, this bumper supply could come down should homes be taken off the market, he said.

Away from the center, London house prices continued to edge higher amid an acute housing shortage. London was one of two regions in the U.K. that saw house prices rise in March, according to the Land Registry. Average London house prices rose 0.2% to £ 534,785.

Write to Art Patnaude at art.patnaude@wsj.com

(END) Dow Jones Newswires

May 06, 2016 04:35 ET (08:35 GMT)

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