UK's luxury home prices climb at record monthly rate of 3.9%
August 20, 2007
By Peter Woodifield
Edinburgh - Prices of luxury homes in London climbed at a record monthly pace in July as buyers competed for a smaller number of properties, broker Knight Frank said yesterday.
The average price of the UK capital's most expensive houses and apartments rose by an average of 3.9 percent last month, according to data compiled by Knight Frank. The annual increase was more than 36 percent, the highest since Margaret Thatcher came to power in 1979.
"Add into the mix rising domestic wealth and rising foreign wealth coming into the country, we can see why prices have risen strongly," said Liam Bailey, head of residential research at Knight Frank. The company forecast a gain of 25 percent for all of 2007.
Investment bankers and hedge fund managers with bonuses to spend are vying with rich individuals from Asia, the Middle East and Russia for a shrinking supply of prime property in central London. The number of homes for sale in the city costing at least £2.5 million (R36.5 million) has dropped by 23 percent since 2005, according to Knight Frank.
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 to take advantage of the city's security, schools, stores, theatres and restaurants.
About 61 percent of all properties in central London that fetch more than £4 million are bought by foreigners, Knight Frank estimates.
These buyers "are much more likely to hold onto their property for a longer period as an investment, even if they return to their home country", said Bailey.
Brothers Sri and Gopi Hinduja, who own Mumbai-based Hinduja Group with a sibling, last year paid £58 million for a 60-room home on The Mall, the avenue which runs from Trafalgar Square to Buckingham Palace, according to the Sunday Times.
Other foreign residents or homeowners include Norwegian shipping magnate John Fredriksen and Vladimir Kim, chairman of Kazakhstan's biggest copper producer, according to the Sunday Times. Overseas buyers are also attracted by tax rules that allow wealthy non-British individuals to live in the UK, while paying their tax overseas.
The Bank of England has raised borrowing costs five times in the past year to keep a lid on inflation. The benchmark interest rate may need to climb to 6 percent in September from the current 5.75 percent, policy makers indicated last week, a move that would further increase mortgage costs for homebuyers.
A house that cost £100 000 in 1976, when Knight Frank started its index covering seven of London's most expensive districts, was worth £4.49 million at the end of last month.
Prime properties in London are the most expensive in the world. - Bloomberg
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