London Luxury-Home Prices Increase the Most Since March 2008

Luxury-home prices in central London jumped 17 percent in February from a year earlier, the biggest gain in almost two years, as more buyers competed for a dwindling number of properties, Knight Frank LLP said in a Business Week article from March 1st. Will this spread to the San Francisco luxury market?

The value of houses and apartments costing more than 1 million pounds ($1.5 million) rose 3.2 percent from January, the London-based property broker said in an e-mailed statement today. The annual increase was the largest since the market peaked in March 2008 and compares with an 11.5 percent advance in January. Prices are still 10 percent lower than the peak.

The lack of properties for sale, combined with a surge in overseas buyers lured by a weaker pound, helped London’s prime real estate perform better than the residential market as a whole. House prices across the country fell last month for the first time in 10 months, Nationwide Building Society said on Feb. 26.

Knight Frank registered 10 new potential buyers last month for every additional property it was asked to sell in the center of the U.K. capital, twice the average since the broker started tracking the ratio five years ago. The company now has 30 percent more new buyers than in any comparable period in the past five years, while it has 22 percent fewer properties for sale than is normal for this time of year.

Overseas Buyers

The pound’s 22 percent decline against the euro in the past three years attracted purchasers from Russia, Italy and Greece, in particular, Bailey said. Foreigners bought 45 percent of properties sold for more than 2 million pounds in the past year, according to the broker.

Prices for the best properties in the Mayfair, Kensington, Holland Park and Knightsbridge districts are reaching or exceeding levels from when the prime central London market peaked in 2008, Knight Frank said.

The broker recently sold a modernized property in Mayfair for near the record price of 3,700 pounds a square foot achieved in 2007, Richard Cutt, head of Knight Frank’s office in the district, said in an interview. He declined to be more specific because of confidentiality agreements.

“Newly refurbished properties done to the right standard are back to their peak and are in very short supply,” he said.

The market’s revival is luring developers back into neighborhoods such as Chelsea, Belgravia, Kensington and Mayfair after a gap of 18 months, Knight Frank said. Construction starts in the municipality of Kensington & Chelsea rose 43 percent between July and December.

Economic Recovery

Consumer confidence rose to a four-month high in February as the U.K. emerged from the longest recession on record, market researcher GfK NOP said Feb. 26. The British economy grew at a faster pace in the fourth quarter than previously estimated, the Office of National Statistics reported the same day.

Prices of luxury properties in central London surged 82 percent during the last boom, between January 2005 and March 2008, Knight Frank’s data show.

The broker compiles its luxury-homes index from estimated values of properties in the Mayfair, St. John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and South Bank neighborhoods of London.

© Business Week, Editors: Andrew Blackman, Anne Pollak

 Full article: http://www.businessweek.com/news/2010-02-28/london-luxury-home-prices-increase-the-most-since-march-2008.html