Americans – Big Buyers of Luxury Homes in London

Luxury-home prices in central London are increasing in value twice as fast as the U.K. market as a whole as the weaker pound leads more overseas buyers to shrug off higher taxes and seek bargains in the most expensive neighborhoods, according to Knight Frank LLP.

Prices of properties costing more than 2 million pounds ($3 million) rose 20 percent in June from a year earlier, the London-based real estate broker said in an e-mailed report today. U.K. house prices gained 8.7 percent in the same period, Nationwide Building Society, Britain’s largest customer-owned lender, said June 30.

“Central London is now a market apart,” Liam Bailey, head of residential research at Knight Frank, said in the report. “The recovery in prices has been driven in large part by the strength of demand from international buyers.”

Prices are still 6 percent below the March 2008 peak. Since then, the pound’s declines against the dollar, the Chinese yuan and other Asian and Middle East currencies has meant an effective drop in values of 25 percent to 30 percent for many overseas buyers, according to Knight Frank.

Led by Russians and Americans, international buyers now account for 68 percent of purchases of London properties costing more than 5 million pounds, up from 39 percent in December 2008, the broker said. In the neighborhoods of Mayfair, Knightsbridge and Hampstead, they account for more than 60 percent of all prime market purchases. The number of different nationalities buying in central London has grown to 51 from 30 in mid-2008.

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London Luxury-Home Prices Driven Higher by Overseas Purchasers [Bloomberg BusinessWeek]