Central London luxury-home values will jump 6 percent this year, Knight Frank LLP said, revising an estimate that prices would be little changed as a weakening pound made the market more attractive to overseas buyers.
The average price of a house or apartment in the city’s most expensive neighborhoods has climbed 4.2 percent this year and interest among prospective buyers remains strong, the London-based broker said in a report today. The pound fell about 5 percent against the euro in the first half and lost 7.9 percent against the Chinese yuan.
The currency’s weakness “helped to boost overseas interest and domestic demand has been aided by London’s economic recovery,” Knight Frank said.
Foreign investors are buying London properties to preserve wealth as political and economic turmoil menace their home markets, leading prices in the city to rise more than brokers had expected. Knight Frank, along with Jones Lang LaSalle Inc. and Savills Plc, last year forecast that prices would be little changed in 2013 after an 8.7 percent increase in 2012.
Knight Frank as recently as last month said it didn’t expect a significant increase in luxury London home values for the whole of this year. Values rose in June by the smallest annual amount since at least December 2009, the broker said last month.
Savills on July 18 revised its forecast of little or no growth in 2013, saying that prime central London prices would climb 6 percent this year and 3 percent in 2014, according to an e-mailed statement from the broker.
London luxury-home prices increased by 0.5 percent in July from the previous month, bringing the gain for the past 12 months to 7 percent, Knight Frank said. The strongest increase was for homes costing less than 1 million pounds, and the biggest gains were in the neighborhoods of Islington, Marylebone and the South Bank. Property prices in prime central London locations are now almost 60 percent above their low during the financial crisis in March 2009, Knight Frank said.
Other factors affecting luxury values include government measures aimed at helping Britons’ enter the housing market by encouraging sales of newly built property and providing guarantees for borrowers with smaller deposits. While the government’s Help-to-Buy program is aimed at mainstream customers, housing market sentiment is “infectious across markets,” the broker said.
U.K. house-price growth slowed in July as more Britons offered their property for sale and demand cooled at the start of the summer, Hometrack Ltd. said today. Average values in England and Wales increased 0.3 percent after a 0.4 percent gain in June, the London-based property researcher said in a statement. From a year earlier, prices were up 1.3 percent, the most since 2010.
The average value of luxury homes in central London surpassed 2 million pounds ($3 million) for the first time in the second quarter as more purchasers competed for a smaller number of properties on the market, broker Marsh & Parsons Ltd. said last week.