LONDON, AP -London’s luxury homes are now the most expensive in the world, experts say, with foreign buyers, salary bonuses and steady interest rates driving prices up in the capital’s overheated property market.
Prime residential property in London now costs around 1,200 pounds ($2,300) per square foot, compared to 1,000 pounds ($1,900) in New York, according to CB Richard Ellis Hamptons International.
And the so-called “super prime properties” in London are going for up to 3,000 pounds ($5,715) per square foot, compared with 2,700 pounds ($5,100) per square foot in New York.
“In terms of time zones and location, London is the most attractive place to be,” said Liam Bailey, head of residential research at the Knight Frank real estate agency.
Prices for central London homes worth more than 1.5 million pounds ($2.9 million) climbed 21 percent for the year ended Aug. 31, according to Knight Frank.
Foreign buyers own 51 percent of the 2 million-pound-plus ($3.8 million) market in London, Knight Frank research shows, compared to 34 percent of the equivalent market in New York and 27 percent in Paris.
The most expensive homes sold this year — a 33 million-pound ($62.8 million) house in Belgrave Square and a former office block on Park Lane — were sold by the Savills real estate agency to buyers from the Middle East.
But even those are dwarfed by the world record 70 million pounds ($133.2 million) paid by Indian-born steel tycoon Lakshmi Mittal for his home at Kensington Palace Gardens in April 2004.
In comparison, in New York’s Manhattan, home to the most expensive real estate in the United States, the average price of a luxury apartment — calculated from the top 10 percent of all transactions — was $5 million in the second quarter, down from 3 percent a year earlier when prices hit a record $5.2 million, according to Miller Samuel.
The U.S. market boom is ending following 17 interest rate increases by the Federal Reserve.
In Britain, interest rates held steady for a year until a surprise hike last month.
Market activity, mortgage lending and house prices all remain strong in London, said Jenny Siebrits, head of residential research at CBRE. “With continued strength in the London market, we expect this trend to continue,” she said.
Foreign buyers like London because of its position as the emerging global financial center and a strong tradition of ease of access and open communications, Bailey said.
“Over the past five or 10 years, London has gained a larger share of international financial activity,” he said. “And, unlike other European financial centers like Frankfurt, buyers are attracted by all the other things the city has to offer.”
Russians, other Europeans and Americans already are a strong presence in the London market, and Asian buyers are taking an increasing slice: The volume of Asian purchasers has grown 60 percent over the past five years, Bailey said.
However, he said strict currency transfer rules are holding back investment from China and India. The firm expects to see a significant increase in Indian buyers in 2007 when changes to the rules governing the export of capital are introduced.
The high prices demanded for prime residences also have been underpinned locally by the 7.5 billion pound in bonuses paid this year to around 330,000 workers at financial firms in the British capital.
Another reason for the continuing high prices is the relatively small number of residences available to buy in the center of London, many of which are only available as leasehold properties.
A leasehold property means that buyers can only purchase the right to live in the building for a set number of years — the number that the lease has to run — and at the end of the lease, ownership reverts to the freeholder. To live there, you pay the landlord a ground rent as well as a service charge to manage any communal areas inside and outside the building.
In most cases, leaseholds run for more than 100 years.
One man happy with the soaring property market in central London would be the Duke of Westminster. He inherited 300 acres of land — in two of the city’s most desirable neighborhoods, upmarket Mayfair and Belgravia.