London Home Prices Jump as Pound Drop Aids Foreign Buyers
Prices sought rose 1.9 percent from February to an average 496,298 pounds ($750,400), the property-website operator said in a report published today. Asking prices in the capital have surged more than 41,000 pounds in the past year and are now pushing close to 500,000 pounds. Nationally, average prices rose 1.7 percent in March from February.
The pound has dropped against both the euro and the dollar this year and is the second-worst performing developed market currency, according to data compiled by Bloomberg. For foreign buyers, Rightmove said the decline has wiped out the 9 percent increase in property prices in the past year and that “sterling’s loss is London sellers’ gain.”
The report “looks encouraging for the U.K. housing market,” Annalisa Piazza, analyst at Newedge Strategy, said in an e-mailed note. “However, the U.K. economy is still far from benefiting from a solid rebound and house prices are unlikely to continue to surge near term.”
Gains in London this month were led by a 6.2 percent surge to a 2.3 million-pound average in Kensington and Chelsea, the city’s most expensive district. Lambeth rose 6 percent, while Westminster increased 5.8 percent.
The pound jumped to its strongest level in more than a month against the euro today after the imposition of a levy on bank deposits in Cyprus threatened to throw Europe back into crisis, fueling demand for U.K. assets as a haven.
Part of the increase in London was due to supply failing to keep up with demand, according to Rightmove. It said that 16,349 new properties were put on the market this month, 12 percent lower than the same period a year ago.
“Overseas buyers transferring their dollars or euros into sterling have found their buying power boosted,” said Miles Shipside, director at Rightmove. “Many new-build developers have been mining this rich seam of overseas cash very successfully.”
Nationally, asking prices for homes have risen 1.2 percent in the past year, today’s report showed. The average price in March was 239,710 pounds and Rightmove said “growing belief in price stability” means transaction volumes may increase this year.
While cautious lending may limit the housing recovery, Shipside said there is “now a bedrock upon which confidence and momentum appear to be building.” The Royal Institution of Chartered Surveyors said earlier this month that its gauges on the outlook for the property market improved in February.
Consumers’ discretionary spending power shrank 1.1 percent in February after falling 1.2 percent in January, Lloyds TSB said in a separate report. Britons don’t expect Chancellor of the Exchequer George Osborne to announce measures to provide assistance when he makes his budget statement in Parliament on March 20, according to the report.
“Consumers don’t expect any relief from the budget, and the recent fall in the exchange rate is likely to add to pressures,” Patrick Foley, chief economist at Lloyds, said in the statement. “Consumer spending is therefore likely to remain weak through the first half of 2013 at least, keeping recovery in the wider economy far from assured.”
Elsewhere, Chinese Premier Li Keqiang pledged to open the economy to more market forces and strip power from the government to achieve 7.5 percent annual growth through 2020 and spread the benefits of the nation’s expansion.
“It’s about cutting power, it’s a self-imposed revolution,” Li, 57, said at a briefing yesterday at Beijing’s Great Hall of the People, his first after being named premier on March 15. “It will be very painful and even feel like cutting one’s wrist.”
Li talked of a “hand” mistakenly attached to the state that needed to be returned to the market. He added that 7.5 percent growth is needed to meet targets for 2020, which include doubling per capita income. Gross domestic product last year expanded 7.8 percent, the least in 13 years.
The Shanghai Composite Index is down about 7 percent from this year’s Feb. 6 peak on concerns that an economic recovery will falter as officials cool the property market and counter risks for banks from an expansion in credit.
New home prices climbed in 62 cities of the 70 the government tracks in February from a year earlier, the National Bureau of Statistics said today. China on March 1 imposed its toughest property curbs in a year, including ordering the central bank to raise some down-payment requirements and mortgage rates and enforcing a property sales tax.
In Singapore, exports fell almost twice as much as economists estimated in February from a year ago as shipments to Europe and the U.S. plunged. Data published in Europe show the region’s trade surplus narrowed in January from the previous month.
A U.S. report from the National Association of Home Builders and Wells Fargo is projected to show an increase in confidence in March.
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