Mexico Congress Approves Oil Overhaul to Break State Monopoly
London Luxury-Home Prices Driven Up by Overseas Purchasers
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.
In central London, three out of five homeowners don’t have mortgages. That compares with two out of five on average in the U.K. as a whole, Knight Frank said.
“One of the main things that has kept prices rising is that supply is very difficult,” Bailey said an interview. The number of new sales instructions received in May and June was 30 percent below average, he said.
Buying an illiquid asset such as a house in London at a time when taxes on rich people are going up is making a statement, Bailey said. “It is saying, ‘I am confident, despite higher taxes, that London is somewhere I want to buy.’”
The top rate of tax on people earning more than 150,000 pounds a year increased to 50 percent from 40 percent in April as the U.K. sought to raise more money from wealthy people to help reduce government borrowing.
Russians were the biggest single group of international buyers of prime London properties in the past 12 months, making up 14 percent of overseas purchasers. They were followed by Americans at 11 percent and Italians at almost 9 percent, Knight Frank said.
Minerva Plc, the developer of the most office space in London’s main financial district, said this week it’s sold more than half of the 77 luxury apartments it’s developing in the affluent Lancaster Gate neighborhood overlooking London’s Hyde Park. The homes were sold for a total of 230 million pounds, at prices between 2 million pounds and 20 million pounds.
Prices for luxury homes climbed 0.9 percent on a monthly basis in June, the smallest increase since March, Knight Frank said.