London Luxury-Home Values Climb as Purchasers From Euro Region Seek Haven
London luxury-home values rose in November for the first time in five months as the debt crisis in the euro region prompted more buyers to compete for a dwindling number of homes for sale, Knight Frank LLP said.
Prices of houses and apartments costing at least 1 million pounds ($1.6 million) rose 0.9 percent from October, the London- based property broker said in a statement today. The annual gain was 11 percent, the smallest since January.
“There’s a belief that London is impregnable,” said Jeremy McGivern, a founder of Mercury Home Search. “The euro zone represents a big percentage of the overseas buyers,” said McGivern, who advises the wealthy on buying homes in central London.
Continental Europeans seeking a home in central London increased by 23 percent from a year ago, led by investors from Italy and Spain, Knight Frank estimates. Many of them regard London as a “safe haven,” according to Liam Bailey, the head of residential research.
On Nov. 29, Ireland became the second country in the euro region after Greece to get a bailout from the European Union to rescue its banks and bolster state finances. The EU sought to prevent a debt crisis from spreading to other countries that use the single currency.
Rupert des Forges, a partner in Knight Frank’s Knightsbridge sales office, said he sold an apartment near Harrods department store last month for 14 percent more than the asking price. The 1,043 square-foot (96 square-meter) property, which is in need of modernization, went for 2 million pounds.
One of the five unsuccessful bidders for the property, south of Hyde Park, was an Italian family that since July has purchased 10 properties in the city, Des Forges said. He declined to name the family or the other would-be buyers.
“Wealthy families and funds take the view that prime central London is a gold-standard investment,” he said. “It’s a defensive position that provides a hedge for the euro going wrong.”
The pound’s slide against other currencies since the financial crisis escalated in September 2007 added to the attraction of London homes to overseas buyers after a 25 percent decline in prime residential property values.
Purchasers from outside the U.K. account for about 60 percent of luxury property transactions in central London, Knight Frank estimates. For those based in the euro region, prices are 14 percent below the peak of two years ago.
Des Forges said that the number of buyers in November totaled 20 to 30 from each of the euro-region countries. “It’s a micro market, but their impact is significant,” he said.
A shrinking supply of luxury homes on the market contributed to last month’s price increase. In three of the most popular London neighborhoods -- Belgravia, Chelsea and Knightsbridge -- the number of properties for sale has dropped by 32 percent from a year ago, Knight Frank said.
Overall, the volume of luxury-property sales is about half the average of 2003 to 2006, according to Property Vision, a unit of HSBC Private Bank that advises the lender’s wealthy customers on buying a home.
“Supply is very tight,” said Charlie Ellingworth, one of London-based Property Vision’s founders.
Knight Frank 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.
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