UK property scene Luxury-Home Prices Rise in London Advance Before Sales-Tax Increase

UK property scene Luxury-Home Prices Rise  in London Advance Before Sales-Tax Increase

London luxury-home prices rose at the fastest rate in a year in the first quarter as overseas buyers vied for trophy properties in the city center and because of a rush to beat a property-tax increase.

The average value of a residence costing more than 1 million pounds ($1.6 million) rose 2 percent from the previous three months, according to an index compiled by London-based property broker Savills Plc. Prices climbed 3.3 percent from a year earlier and are 6.2 percent below the peak in the third quarter of 2007.

According to Bloomberg report, an increase in sales of the most-expensive central London properties to buyers from outside the U.K. lifted the average price for transactions handled by Savills to 5 million pounds from 3 million pounds a year earlier. The sales tax for British homes costing at least 1 million pounds increases next month by 1 point to 5 percent.

“Things are absolutely flying” in the ‘Big Three’ central London neighborhoods of Belgravia, Knightsbridge and Mayfair, said Johnny Turnbull, managing director of Turnbull Property, which advises the wealthy on buying London homes. “A lot is down to foreign buyers coming into the market.”

The pound’s 23 percent slide against a basket of other currencies since the housing-market peak in 2007 has made London real estate attractive to international purchasers seeking a pied-a-terre or an investment property. They have had to compete for a dwindling number of properties for sale.

Buyers from outside the U.K. accounted for about 70 percent of purchases of 5 million-pound homes, while the number of properties available in that price bracket is about 30 percent below the five-year average, Savills said.

Russian Buyers

“We had an incredibly strong start to the year at the top end and seen lots of activity from across the world, with Russian buyers dominating,” said Jonathan Hewlett, head of the company’s London residential division.

Prices in central London neighborhoods near Hyde Park, which are the parts of the city most favored by overseas buyers, gained 2.8 percent from the previous quarter and 3.7 percent from a year earlier, Savills said.

A desire to protect wealth from financial or political volatility at home is driving interest in acquiring London properties, according to Knight Frank LLP, another broker. The firm estimated that it handled deals involving buyers from 50 countries last year, up from 30 nationalities in 2008.

Middle East Unrest

Political instability in the Middle East has increased the number of sales to buyers from that region, Savills said. W.A. Ellis LLP, which specializes in the Knightsbridge market, said it receives 10 inquiries a week from prospective buyers or renters from the Middle East since January’s uprising in Tunisia triggered unrest across the region.

For Middle East buyers, “there’s been an acceleration in the decision process,” said Robert Bailey, who runs a property purchase advisory company of the same name. “There’s more focus now about what to do if potentially things topple and there’s an exodus.”

The pursuit of a London property as a haven to preserve wealth has ensured the very top tier of “super prime” real estate costing more than 5 million pounds has “broken away” from the rest of London’s prime market, said Yolande Barnes, Savills’s head of residential research.

Luxury houses have appreciated more than apartments. Prices for houses rose 3.4 percent in the first quarter, or double the rate for high-end apartments across the British capital, according to the Savills report. Prime house prices are now 0.5 percent higher than the peak of 2007, the report showed.

Source : Thisday