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Fuel London Home Price Boom
Nov 16th 2005
House prices are booming in London's most-sought-after
locations as City bankers and brokers anticipate
hefty bonuses this year, research shows.
Estate agent Knight Frank said prices in
prime central London boroughs, where flats
sell for an average of more than £1.5
million and houses for around £3 million,
had risen by 1.1 per cent during October,
the highest monthly increase since February
last year. It said the market was being
driven by a combination of news that City
staff were in line for the highest bonuses
for years, as well as a shortage of good
property at the top end of the market. October's
jump comes after prices inched ahead by
a total of just 0.9 per cent during the
previous three months, and against a background
of falling prices across the rest of the
London market. Bonuses are expected to be
higher this year compared with previous
ones following a recent spate of merger
and acquisition activity. At the end of
October, so-called Merger Monday saw mobile
phone operator O2 receive a takeover offer
from Spain's Telefonica, while drinks giant
Allied Domecq and logistics firm Exel also
agreeing multibillion pound deals earlier
this year. Sarah Van der Noot, of London
Property Search, said she had seen a 50
per cent increase in the number of calls
she was getting from people who wanted her
to find them a property. She said: "I'm
getting a lot of phone calls about getting
help finding pads. Because of the size of
the bonuses, it is all about luxury and
sexy places. It's almost like money isn't
an object." She said people were feeling
very confident because of the size of the
bonuses they were receiving, and added that
she had not seen anything like it since
the Dot Com boom of the 1990s. The main
impact was in the £2.5 million-plus
price range, although City bonuses were
also leading to prices of £1.5 million
properties rising, as people bought large
homes in the country and spent less on a
place in the capital to stay in during the
week.
LONDON (Reuters) - Average asking prices
on a home fell in December2005, as sellers
cut their prices to book a sale before Christmas,
but house price growth is set to pick up
in 2006, according to a report on Monday.
Property Web site Rightmove said house prices
fell by 0.8 percent in its November 13 to
December 3 survey compared with the previous
period, taking the average asking price
down to 196,181 pounds from 197,855 pounds
in the previous survey. The annual rate
of increase eased to 3.4 percent from 4.0
percent in the previous survey. However,
the average number of unsold properties
on estate agents' books fell to 65 from
69 in the last survey, suggesting that activity
was picking up, the report said. Indeed,
Rightmove said stable economic growth should
support demand and drive house price inflation
to around 4.0 percent in 2006, pushing average
asking prices above 200,000 pounds. However,
house price inflation is expected to remain
in line with wage growth, Rightmove said.
"Affordability constraints, especially
among first time buyers, will cap price
rises to the levels of average wage inflation
for 2006 and some years beyond," the
report said. Major mortgage lender Nationwide
Building Society predicted last week that
house prices would at worst stagnate and
at best rise by 3 percent over the course
of next year.
House
prices are falling at their fastest rate
since the 1990s house price crash, losing
6.1% of their value during the past year,
Britain's biggest mortgage lender has said.
The average cost
of a home slid by a further 2% during June,
to bring falls so far this year to 8.9%,
according to Halifax. The annual rate at
which prices are dropping continued to accelerate
during the month, increasing to 6.1%, the
highest level since March 1993 and close
to the record annual fall of 8.3% reached
in December 1992. On a quarterly basis,
homes in the UK lost a record 5.5% of their
value during the three months to the end
of June, compared with the previous three
month period, although this measure of prices
changes is more volatile than on an annual
basis. Halifax said the average home now
cost £180,344 - the same as in August
2006, although prices are still 2% higher
than two years ago and 40% higher than five
years ago. The figures are in line with
those reported by Nationwide Building Society
last week which showed that house prices
fell for the eighth month in a row during
June, dropping by 0.9%. House prices are
falling due to a combination of stretched
affordability following strong growth in
recent years, and the problems people face
getting a mortgage as a result of the credit
crunch.
