Values of houses and apartments costing an average of 3.7 million pounds ($6.1 million) rose 9.6 percent in the 12 months through July, according to an index compiled by the London-based real-estate broker released today. That’s the most since January, when there was a 10.3 percent gain.
The countries that share the euro have been roiled by a sovereign-debt crisis that led to bailouts for Greece, Ireland and Portugal and now threatens Spain and Italy. That encouraged buyers to invest money in London’s prime property market, where there’s a pipeline of developments valued at about 21 billion pounds, London-based consulting firm EC Harris LLP said July 4.
“The increase in supply is in no way making up for the pent-up demand,” Grainne Gilmore, head of U.K. residential research at Knight Frank, said by telephone. “With everything that’s going on in the euro zone, London is definitely seen as a safe haven.”
Luxury-home values in the U.K. capital have rebounded faster than those for other properties as the pound’s weakness also helped to attract foreign purchasers. Buyers from France, Italy, Greece and Switzerland accounted for about 16 percent of sales in the six months through March, according to Gilmore.
“You can’t underestimate the demand that is coming from overseas,” she said.
The pound’s 22 percent slide against a basket of 9 other developed-market currencies, as measured by Bloomberg Correlation-Weighted Indexes, since the market’s previous peak in March 2008 has also made an apartment or house in affluent London neighborhoods more affordable for overseas buyers.
Middle East investors also targeted the U.K. before Ramadan starts this month, said Noel Flint, Knight Frank’s head of London residential. Homebuyers from the region are likely to return to the London market after the Muslim holy month, he said.
Since January, the number of luxury homes for sale has risen about 8 percent, Knight Frank estimates. Even so, prices in the Chelsea neighborhood have advanced 7.7 percent during that time, while Mayfair prices have climbed 7.2 percent.
Prime London residential values are now 35 percent higher than in March 2009, when the U.K. property market slumped during the global recession.
In July, prices for luxury houses and apartments increased 0.7 percent from the previous month, the smallest gain since October, Knight Frank said. Rents rose 0.3 percent, according to the broker.
Investors and developers plan to build 9,000 prime apartments and houses by the end of the decade, EC Harris said in last month’s report. The new projects include KOP Properties Pte. Ltd.’s revamp of 10 Trinity Square, which is opposite the Tower of London, and Richard Caring’s plan to convert the former U.S. Navy building on Grosvenor Square to luxury apartments.
Orion Capital Managers LP bought an acre of residential land in Chelsea where it plans to build a 300 million-pound luxury-housing development, founding partner Aref Lahham said by phone today. The development will have six apartments, two villas and one penthouse. Construction will begin in six months, he said.
To contact the reporter on this story: Chris Spillane in London at email@example.com.