Luxury-home prices in central London rose on an annual basis for the first time in 17 months as bank and hedge-fund executives bought houses and apartments in anticipation of bonuses, Knight Frank LLP said.
Values of properties costing more than £1 million (US$1.6 million) were 1.6 percent higher last month than a year earlier, the first annual increase since June last year, the London- based broker said in an e-mailed statement yesterday. Still, prices are 15 percent below their peak in March last year.
“Anecdotal evidence from across our offices suggests that City money is becoming more apparent as we get closer to the end-of-year bonus season,” Liam Bailey, head of residential research at Knight Frank, said in the statement. “Demand from senior management is driving the market.”
Bonuses for financial-services employees in the City of London and Canary Wharf, the two largest financial districts, may rise 50 percent this year to £6 billion, Knight Frank said. Finance industry workers account for half the demand for luxury homes.
Prices rose 1.2 percent from in November from October, the eighth straight month-on-month increase, Knight Frank said. The most expensive homes didn’t start recovering in value until May, the broker said.
While bonuses being paid by banks such as Goldman Sachs Group Inc are likely to help the housing market, the number of properties available will remain low, Louise Hewlett, managing director of London-based Ayslesford International said by e- mail.
“It is the shortage of supply which has given the rather false impression of a buoyant market,” said Hewlett. “In some instances, high prices have been paid purely based on the lack of choice and competition from other buyers.”
Prices increased the most among properties costing more than £10 million, gaining 1.9 percent last month from a month earlier, Knight Frank said. Houses and apartments in Chelsea, Kensington and Knightsbridge, districts favored by bankers, rose the most.
Luxury residences may return to peak prices in 2012, a year or two sooner than the rest of the UK housing market, Knight Frank and Savills PLC estimate. The pound’s 19 percent decline against a basket of currencies since the home market’s peak has revived demand from foreign investors.
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