May 8 (Bloomberg) -- London's priciest homes have risen $500 a day for the past 30 years, returning two-thirds more than U.K. stock indexes, said real estate advisers Knight Frank LLC.

Prime houses and apartments in the smartest districts of the U.K. capital have appreciated 30-fold in 30 years. An investment of 100,000 pounds ($186,000) three decades ago turned into 3.08 million pounds at the end of April, Liam Bailey, Knight Frank's head of residential research, said in an interview. The gain amounted to 272 pounds for each of the 10,947 days between April 30, 1976, and the end of last month.

``Often the things you think are expensive at the time turn out to be the best investments,'' said Anne Griffiths, who bought her five-story, late-1840s Primrose Hill house for less than 100,000 pounds in 1969 and is now selling it for 3.25 million pounds. ``Investment didn't come into it at the time, we just wanted a good home in which to bring up our family.''

A similar investment in the FSTE All-Share Index in April 1976 was worth about 1.8 million pounds at the end of last month. Following the Standard & Poor's 500 Index over the same period would have turned 100,000 pounds into about 1.3 million pounds.

The Knight Frank index covers apartments with an average value of more than 1.5 million pounds and houses averaging almost 3 million pounds in seven London districts. Prices rose 2 percent last month, the smallest gain since January. April was the 16th straight month of rising prices and the seventh consecutive month with an increase of at least 1 percent.

Hard to Sustain

``I would be surprised if it continues at this rate much beyond June,'' said Knight Frank's Bailey.

Properties in Chelsea have risen 12 percent this year, said Knight Frank. Other districts in the survey include parts of Kensington, as well as Belgravia, Knightsbridge, St Johns Wood, Mayfair, Holland Park, Maida Vale, St James and Regent's Park.

Over the 12 months to 30 April prices rose 14.7 percent, the biggest annualized increase for five years. The acceleration is in contrast to Manhattan, the most expensive residential market in the U.S. The average price for condominiums and cooperatives in Manhattan is increasing at the slowest rate in three years as a result of rising mortgage rates.

Knight Frank has 135 houses and apartments in London on sale at 3 million pounds or more on its Web site, including two at 32 million pounds each, one in Chelsea and the other in Highgate. It has 29 such properties, including 16 houses, in the districts covered by the survey. It has a 9 million-pound apartment for sale on Park Lane overlooking Hyde Park.

Financial Center

London's position as one of three global financial centers, together with New York and Tokyo, has fueled demand for expensive homes from bankers, traders and fund managers. Bonuses paid to employees of London-based financial firms last year rose an estimated 16 percent to a record 7.5 billion pounds, according to the Centre for Economics and Business Research.

People also are increasingly keeping their original property when they move home rather than selling it to finance their new purchase, said Knight Frank. They are staying longer in their homes than they used to, and owners are holding out for higher prices.

International buyers, led by investors from western Europe, Russia and the Middle East, continue to account for more than half of all purchases at the top end of the market, said Bailey.

Property prices in London as a whole rose 19 times in the 30 years to the end of last year, according to data from the Office of Deputy Prime Minister. The average home in London cost almost 283,000 pounds at the end of 2005, it said.

The following table shows the increase in value of prime central London real estate since 1976, starting from a base of 100,000 pounds.

Year      Value in pounds   Percentage gain
                            over 5 years

1976        100,000           --
1981        335,000          235%
1986        675,000          101%
1991        827,000           23%
1996      1,111,000           34%
2001      2,427,000          118%
2006      3,081,000           27%

Source: Knight Frank LLC

To contact the reporter for this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net

Last Updated: May 8, 2006 03:21 EDT