Luxury-home prices in London, the world's most expensive city, rose at an annual rate of 31% in February, the fastest pace in 28 years.
The average price of London's most expensive houses and apartments gained 2.6% on a monthly basis, according to data compiled by Knight Frank, a real estate broker based in the UK capital. In January, the gain was 3%. „Prices in central London have for the past two years been growing at three times the rate of the rest of the UK,” said Liam Bailey, the partner in charge of residential research at Knight Frank, in an interview at a conference in Cannes, France. „I wouldn't be surprised to see 20% growth this year.” The last time the cost of buying a luxury home in London rose this rapidly was when Margaret Thatcher became prime minister in 1979.
Demand is growing from foreign investors seeking a pied-a-terre in the British capital, and from bankers with record bonuses looking to invest in property amid a shortage of homes to buy. The UK's tax laws allow wealthy foreigners to live in the country without paying British taxes on their global assets. That has encouraged business people including Lakshmi Mittal, chairman of the world's largest steel company, Roman Abramovich, Russia's richest man, and brewing heiress Charlene de Carvalho-Heineken to buy property in London.
The most expensive homes in London, or „super prime,” such as the Hyde Park luxury apartment complex project that's managed by Candy & Candy Ltd., are being pre-marketed with price tags of about £4,500 ($8,700) a square foot, said Bailey. In New York City, the most expensive apartments bordering Central Park sell for about $6,000 a square foot. The 330,000 workers in London's main financial district may have earned a record £8.8 billion in bonuses last year according to the city's Centre for Economics and Business Research Ltd. Savills Plc, the UK's largest commercial real estate consultant, yesterday said it paid £125 million in bonuses for 2006. That means an average payout of £31,250 to each of the 4,000 employees who qualified.
Demand from wealthy buyers outstrips the number of properties coming onto the market, according to CEO Aubrey Adams. Prices for prime London properties have climbed for 26 straight months and have increased by at least 2% in 12 of the last 13 months. „If you try buying a house in central London you're going to have a problem at the moment, because there is very little available,” Adams said in an interview yesterday. Savills and Knight Frank are the biggest brokers for luxury homes in London. For Leon Bressler, the former CEO of France's largest real estate investment trust and since October a London-based partner of Perella Weinberg Partners LLP, prices reflect London's stature as a global financial center and its economic dynamism.
Britain's economy will probably expand 2.9% this year, the Confederation of British Industry said today. In December, the CBI forecast growth of 2.7%. That pace of growth is faster than the 2.2% average for the 13 countries sharing the euro, according to estimates by the Organization for Economic Cooperation and Development. Last year, London was ranked first in a survey of the world's most expensive cities compiled by UBS AG. New York was in second place, while Oslo was third.
Knight Frank compiles its monthly survey from sales of properties in seven of London's toniest postal districts, including Hampstead, Notting Hill and Knightsbridge. The firm defines prime residential real estate as a house worth more than £3 million or an apartment worth more than £1.5 million. It doesn't disclose average prices in the survey. (Bloomberg)