Record high for London homes

by Richard Warren

Jul 11, 2012, SCMP

Residential property prices in central London's most sought-after districts have reached a new, record high. According to property consultancy, Knight Frank, they increased 0.8 per cent last month, which means they now average GBP1,600 (HK$19,200) per sq ft, 13 per cent higher than the peak of March, 2008.

Prices in Mayfair, Knightsbridge and other prime central London locations have risen 48 per cent since the post-credit-crunch low of March 2009.

Hong Kong owners would have seen the value of their London properties increase 62 per cent in Hong Kong dollar terms over this period, because of the pound's rise on currency markets.

Overseas investment helped fuel London's price rises, with 3.4 per cent of buyers coming from Hong Kong in the 12 months to last month, said Liam Bailey, head of residential research at Knight Frank.

Europeans are making a big impact. One-fifth of buyers in the past 18 months were mainland Europeans looking to get money out of the troubled euro zone.

Bailey said the rising cost of property was starting to dampen demand, so price rises for the rest of this year would not be significant.

"Higher prices and the stamp duty rise in April have made it more expensive to buy," said Bailey. "The euro-zone crisis has knocked confidence, and the UK economy is weaker than we thought six months ago."

There were 18 times more Hong Kong and mainland buyers than sellers during the past 12 months, the highest ratio among all nationalities buying in London, reports property consultancy Savills.

Of Hong Kong and mainland purchasers, 70 per cent bought second-hand properties valued under GBP1 million, the consultancy found. Most did so for investment or to accommodate children studying in the city.

Hong Kong buyers are prevalent at newly built riverside schemes like One Tower Bridge, where they have bought 27 per cent of GBP130 million worth of apartments sold since marketing began last September, with prices starting at GBP895,000.

A total of 353 units will be built at the scheme by the developer, Berkeley, when completed in 2014.

Most new-build projects are marketed in East Asia before being offered to Britons, so this has led to 31 per cent of sales being made to Hong Kong and other Asian buyers, reports Savills.

Marketing projects in East Asia had become an important source of forward financing for British developers, said Yolande Barnes, head of Savills residential research.

"The money's in that part of the world and they are used to buying off-plan," she said.

Guy Meacock, director at buying agency Prime Purchase, said the popularity of lateral apartments with Hong Kong and other overseas buyers was contributing to a construction boom in this type of property, helping lift average prices in prime central London, because purchasers paid a premium for these homes.

"A top-of-the-range house will cost GBP4,000 per sq ft, but a lateral apartment, such as on the north side of Eaton Square, will cost GBP5,000, and at One Hyde Park, GBP7,000," Meacock said.

"Overseas buyers like lateral apartments, because that is what they are used to at home."