Luxury home sales in Bermuda dropped in the first half of 2008, but as recently as July, realtors were guardedly optimistic that the second half of the year would see an improvement.

Now, with global financial markets in turmoil, they say that the high-end market is softening.

Just under $20 million worth of luxury home sales were closed between January and June, well down from the record sales in the first half of 2007.

But Coldwell Banker president Brian Madeiros said in a research report in July that the firm's market intelligence indicated that more than $25 million of luxury home sales are under contract and may close by December 31.

Luxury homes are defined by Coldwell Banker as homes with an Annual Rental Value exceeding $153,000.

Yesterday, Mr. Madeiros said the recent financial markets' meltdown was difficult to read with regard to the Bermuda housing market.

He said: "Since the last update in July, things have changed, and not surprisingly, the luxury home market, in general terms, is showing some signs of softening given the state of the financial markets."

But he added that it was still likely that closed sales would be just below the average of $40 million set over the last ten years.

"The anticipated total dollar value of luxury homes sold in 2008 should be just below the average of $40 million and we anticipate that Bermudian buyers will still be driving that segment of the residential market."

In 2005, a near-record $80 million worth of luxury homes changed hands.

In the July update, Mr. Madeiros said that despite the weakening global economy and local tax changes raising the licence fees on sales, interest from high net worth buyers remains strong.

"Even in the face of potentially harmful global developments, Coldwell Banker Bermuda Realty's luxury home agents report notieceable demand from high net worth international buyers. This demand was most pronounced in February and March with a spike in interest in large estate homes listed at more than $12 million," he said.

Mr. Madeiros added that most of the demand was coming from the US and Canada, and he noted that while there had been declines in the broader North American housing market, demand for high-end homes in desirable neighbourhoods had remained strong at the time of writing.

He also said that tax increases in Bermuda on the sale of homes to non-Bermudians did not appear to have reduced interest. From April 1, non-Bermudian buyers of land have to pay a licence fee of 25 percent of the purchase value, up from 22 percent, for houses and 18 percent, up from 15 percent, for condominiums.