Luxury-home prices in central London climbed the most in 13 months in October as overseas buyers seeking a haven from the sovereign debt crisis competed for a smaller number of properties for sale, Knight Frank LLP said.
Values of houses and apartments costing an average of 3.7 million pounds ($5.9 million) rose by an average of 12.5 percent from a year earlier, the London-based broker said in a report today. That’s the most since a 14.2 percent increase in September 2010.
Mario Draghi, head of the European Central Bank, said yesterday that the euro area faces a recession because of the debt crisis and Royal Bank of Scotland Group Plc today reported a larger-than-estimated drop in profit after the turmoil eroded securities-unit revenue. The instability helped push luxury-home prices to a record in October, though Knight Frank expects an increase of only 5 percent next year and little change in 2013.
“We’re entering a much slower stage of price growth,” said Liam Bailey, head of residential research at the company. “We can’t see how you can have double-digit growth for three years on the trot.”
Prime central-London prices have advanced 38 percent since the market’s last slump in March 2009, Knight Frank said. Values gained 0.7 percent on a monthly basis, the 12th straight increase. House prices across the U.K. rose 0.4 percent, Nationwide Building Society said Nov. 1.
The number of luxury homes on the market has declined by 14 percent in the past 12 months, Knight Frank estimates. The company didn’t say how many properties were available.
The shrinking supply of prime properties is encouraging developers to convert commercial buildings to homes in expensive areas such as the West End, where most of the offices were originally residential real estate.
An office property at No. 7 St. James’s Square is being turned into luxury apartments by the building’s owner, Dublin-based Green Property Ltd. This may increase the value to more than 50 million pounds, according to Richard Barber, a partner at prime real estate broker W.A. Ellis LLP.
The number of London houses and apartments that sold for more than 5 million pounds rose 31 percent to 262 in the nine months through September, real-estate broker Savills Plc said last month. Overseas buyers comprised 65 percent of the market for homes costing that much, according to the report.
Russians have accounted for about 12 percent of non-British purchases this year, compared with about 10 percent in 2010. The prospect of an election in the eastern European country next year may prompt more investors to target the U.K., Bailey said.
“When you get an election in Russia or anything potentially unstable in the political climate, you will see a growth in Russians looking to buy property in London,” Bailey said.