1.1% rise in average price of units costing £2.5m or more; overall market unchanged
(EDINBURGH) Luxury-home prices in London, the world’s most expensive city for prime real estate, rose at the fastest rate in four months as the overall UK market stagnated, industry reports showed.
The average price of houses and apartments costing at least £2.5 million (S$6.96 million) climbed 1.1 per cent in January from December, Knight Frank LLC said in a statement on Tuesday. There was no change in the average cost of homes across the country, HBOS plc said in a separate report.
‘It is being totally led by the purchase of properties of £10 million or more,’ Liam Bailey, head of residential research at Knight Frank, said in an interview. ‘The number of deals done at that level in the past three months was double a year ago.’
The wealthiest property buyers don’t need to borrow money to make purchases, so they’re not dependent on lenders that have made it more difficult and costly to obtain mortgages, Mr Bailey said.
Britons are now buying between 40 and 50 per cent of all London homes priced at more than £10 million, up from 30 per cent a year ago, according to Knight Frank, a real estate broker based in the city.
London’s most expensive new- built home was sold for £50 million last month to Hourieh Peramaa, a 75-year-old real estate entrepreneur from Kazakhstan, Sunday Times reported on Jan 27.
The house on Bishops Avenue in Hampstead, northwest London, has nine main bedrooms, 16 bathrooms and five reception rooms, and was acquired from Turkish businessman Halis Toprak.
Ms Peramaa plans to spend another £30 million extending and redecorating the property, the newspaper said.
Earlier in January, Lev Leviev, an Israeli diamond billionaire, paid £35 million for a house in the same district as Ms Peramaa, according to Daily Telegraph.
Indian steel entrepreneur Lakshmi Mittal owns the UK’s most expensive home. He paid £57 million in 2004 for a home close to Kensington Palace in central London. Both Kensington Palace Gardens and Bishops Avenue have been dubbed ‘Billionaires Row’.
January’s increase in luxury-home prices was the biggest since September, when prices advanced 1.2 per cent.
For the year ended Jan 31, the gain was 26 per cent, the smallest since October 2006.
Across Britain, prices in January were 4.5 per cent higher than a year earlier, according to HBOS, the country’s largest mortgage provider. Lenders are selling fewer mortgages as they contend with losses stemming from the collapse of the US sub-prime mortgage market.
Properties at the lower end of Knight Frank’s prime index are now moving more in line with the UK market, said Mr Bailey.
Bonus-earners in the UK’s financial industry will invest £2 billion in homes this year, compared with £5.5 billion in 2007, as they look for higher returns, Savills plc said in November. Savills and Knight Frank are the biggest brokers for prime London properties.
This year, top-quality dwellings in the UK capital will appreciate about 3 per cent, Knight Frank said on Tuesday, reiterating an October forecast. The Bank of England’s ability to cut interest rates to ward off an economic slowdown may be hindered by inflationary pressures, said Knight Frank.
‘It is fair to say that the issues of confidence and affordability that have so far dogged the main market may now promote a more cautious purchasing environment in the prime sector too,’ Mr Bailey said.
Britain is home to about 68 billionaires, according to the Sunday Times 2007 Rich List. Many are investors from China, India and Russia who have bought homes in London for its schools, stores, theatres and restaurants.
The most expensive houses can fetch as much as £4,000 a square foot, CB Richard Ellis Hamptons International estimates. That compares with about £2,075 a square foot in New York, the broker said.
Purchasing at such prices so far isn’t being inhibited by the prospect that the UK may impose an annual tax of £30,000 on wealthy individuals who live in the UK and keep their residence elsewhere for tax purposes, said Mr Bailey.
‘There is a lot of interest in deals being done by super-rich foreign buyers,’ he said.
Source: Bloomberg (Business Times 7 Feb 08)