Published September 4, 2006

London is costliest city for luxury homes, says study

(NEW YORK) Measured in British pounds, London has overtaken New York City as the most expensive city in which to buy a luxury home as the US dollar has weakened, a study by CB Richard Ellis Hamptons International showed.

Prices for prime residential real estate, like London's Chelsea and Notting Hill districts, costing more than 1 million (S$3 million), averaged about 1,200 a square foot in the second quarter, the study showed. Equivalent space for Manhattan homes - on Fifth, Park and Madison avenues near Central Park - cost about 1,000.

The pound's 16 per cent gain against the US dollar during the past three years has amplified house price increases in London, where as many as 40 per cent of luxury home sales are to foreign buyers, said Jennet Siebrits, head of residential research at CBRE.

Rising sales and increased mortgage lending also suggest that the UK's US$6.8 trillion housing market hasn't yet entered the slowdown that the US is experiencing.

'With the continued strength in the London market, we expect this trend to continue,' said Ms Siebrits, who expects prices for all London homes to rise 9 per cent this year.

After New York came Tokyo, with homes at 900 a square foot, Hong Kong at 700 and Singapore at 600, CBRE said in its semi-annual review of the global housing market.

London's top position stems from the rise in the pound. At the end of August 2003, the pound traded at about US$1.58, whereas it's now at about US$1.90. Prime New York residential real estate sold on average at a record US$1,842 a square foot in the second quarter, when the pound averaged about US$1.85, according to Miller Samuel, a residential appraiser.

In Manhattan, home to the most expensive US real estate, prices have held near record levels even as the number of sales dropped 15 per cent in the second quarter to a five-year low. The average price of a luxury Manhattan apartment, calculated from the top 10 per cent of all transactions, was US$5 million in the second quarter, down 3 per cent from a year earlier when prices hit a record US$5.2 million, according to Miller Samuel.

Nationwide, UK's third largest mortgage lender, said the average cost of a home in the UK rose 6.6 per cent in August, the fastest in a year. - Bloomberg