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London House Prices Reach Record as Buyers Move to Suburbs

Average prices in London jumped 1.8 percent from May to 438,622 pounds ($708,680). Photographer: Simon Dawson/Bloomberg
Average prices in London jumped 1.8 percent from May to 438,622 pounds ($708,680). Photographer: Simon Dawson/Bloomberg

June 20 (Bloomberg) -- London home sellers raised asking prices to a record in June as demand from overseas buyers for luxury properties in the capital’s center began to “spill over” into some suburbs, Rightmove Plc said.

Average prices in London jumped 1.8 percent from May to 438,622 pounds ($707,673), the London-based operator of the U.K.’s biggest property website said in a report today. Nationally, values increased 0.6 percent, according to Rightmove, which added it doesn’t expect gains to be sustained.

While Britain’s property market is struggling to build momentum as banks limit lending and budget cuts undermine confidence, the exception is London where foreign buyers are seeking homes in areas such as Kensington and Chelsea. Rightmove said a lack of mortgages and a seasonal slowdown means national values will probably fall about 7 percent in the second half after an 8.1 percent gain in the first six months.

“With the best areas ‘going international’ and moving out of many Londoners’ reach, the next rung down starts to look compelling in terms of value,” Miles Shipside, commercial director at Rightmove, said in the report. “There will be strong demand from those who want to invest in good quality property further out of the center.”

The pound fell 0.4 percent against the dollar and was trading at $1.6135 as of 8:46 a.m. in London.

Regional Prices

Homes valued at more than 1 million pounds in London’s Kensington and Chelsea and Westminster areas led price gains in recent months. That has now changed, with suburbs further out now posting the largest annual increases, Rightmove said. Out of the 32 London boroughs tracked by the company, Brent, Tower Hamlets and Merton led gains on the month, while Wandsworth and Hounslow were among the best performers from a year earlier.

In a separate report today, Markit Economics said Britons’ expectations of house prices over the next year turned positive this month for the first time since September. Londoners were the most likely to anticipate an increase in the value of their property, it said.

From a year ago, London prices are up 2.1 percent, while across the U.K., values are 1.1 percent higher, Rightmove said.

Five of 10 regions in England and Wales tracked by Rightmove showed gains on the month, led by a 2.2 percent increase in East Anglia. The East Midlands area had the largest decline, with a 3.2 percent drop from May.

Consumer Squeeze

British households are under pressure from the government’s fiscal squeeze and as wage growth fails to keep up with inflation.

The Engineering Employers’ Federation said in a report today that pay growth at manufacturers accelerated in the three months through May. Still, the data shows it is lagging inflation that was at 4.5 percent in May, more than twice the Bank of England’s target.

The average pay settlement increased to 2.6 percent from a 2.5 percent gain in the quarter through April, the London-based EEF said. Its data cover 233 pay settlements affecting 39,881 employees.

Markit said Britons’ finances deteriorated at the fastest pace since March 2009 this month. A gauge of household finances fell to 35.1 from 36 in May, a survey of about 1,500 people by Ipsos MORI between June 8 and June 14 showed. A reading below 50 indicates contraction. Markit began the monthly study in February 2009.

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