LONDON (Reuters) - The price of central London's most expensive homes fell again in October, continuing a decline which began earlier this year due to increased property taxes and the Brexit vote, a consultancy said on Monday.

In the latest sign that the property market is cooling since Britons voted to leave the European Union, Knight Frank said prices fell by an annual 2.3 percent last month in London's most desirable postcodes, the biggest drop in seven years.

A decline of 1.8 percent in August and 2.1 percent in September had been the biggest falls since October 2009, when prices fell 3.2 percent as Britain began recovering from the effects of the financial crisis.

Prime central London stretches from Kensington and Notting Hill in the west to the City of London in the east. The biggest drop was recorded in Chelsea, where prices fell 9.9 percent.


"Uncertainty generated by the decision to leave the EU has made vendors more realistic on asking prices," Head of London Residential Research Tom Bill said.

Stamp duty - paid on purchases of new homes- was increased from April on second homes and buy-to-let purchases, particularly hitting central London where many buyers are foreign investors.

The timing, which brought forward many purchases and resulted in a slump afterwards, makes it difficult to disentangle the effect from the uncertainty created by the run-up to the June 23 referendum and the decision to leave the EU.

Upmarket estate agents Savills <SVS.L> said in September that prices in London's prime locations will fall by 9 percent this year and not grow again until 2019.

There are also signs that foreign investors are bargaining down prices and using the fall in the value of the pound, which has declined by around 15 percent against the euro and the dollar since the referendum, as a way to snap up London property with large discounts.

"While sales have been weaker, a combination of lower asking prices and a weaker pound has begun to push demand indicators higher," said Bill.

(Reporting by Costas Pitas; editing by Stephen Addison)

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