Central London luxury-home values will jump 6 percent

Central London luxury-home values will rise 6 percent this year, Knight Frank LLP said, revising its estimate that prices would be little changed in 2013.

The average price of a house or apartment in the city’s most-expensive neighborhoods climbed 4.2 percent so far this year and interest among prospective buyers remains strong, the London-based broker said in a report today. Key reasons include the city’s reputation as a safe haven for investment and the value of the pound, Knight Frank said.

“Further weakening in sterling in the first half of the year helped to boost overseas interest and domestic demand has been aided by London’s economic recovery,” Knight Frank said.

Overseas investors are buying London properties to preserve wealth amid political and economic turmoil in their home markets, leading prices to rise more than brokers had expected. Knight Frank, along with Jones Lang LaSalle Inc. (JLL) and Savills Plc (SVS), last year forecast that prices would be little changed in 2013 after an 8.7 percent increase in 2012.

Knight Frank as recently as last month said it expected little change in luxury London home values for the whole of this year. Values rose in May by the smallest annual amount since December 2009 on a drop in the affluent Knightsbridge area, the broker said last month.

The average value of luxury homes in central London surpassed 2 million pounds ($3 million) for the first time in the second quarter as more purchasers competed for a smaller number of properties on the market, broker Marsh & Parsons Ltd. said last week.

The strongest increase in prices has been for homes below 1 million pounds, and the biggest gains in June were in the neighborhoods of Islington, Marylebone and the South Bank. Property prices in prime central London locations are now almost 60 percent above their low during the financial crisis in March 2009, Knight Frank said. (Bloomberg)