Saturday, December 16, 2006
LONDON — Brimming with posh stores and elegant shoppers, New York City always has had a certain cachet. But there is one thing that America’s largest city can no longer claim: the world’s most expensive homes.
That honor now belongs to London, the priciest place in the world to buy a luxury home.
The London residential market is red-hot, with average sale prices reaching $1.9 million. Prestige neighborhoods, such as this project on tony Grosvenor Street, are drawing record prices.
Driving the city’s overheated property market are generous salaries and bonuses, plentiful foreign buyers and a simple lack of supply.
Simon Barnes, who finds properties for wealthy clients, said that at least 10 people immediately chase any house that comes on the market in London.
“It’s quite frightening, really,” he said.
A recent study by CB Richard Ellis Hamptons International Ltd., a real estate consultancy, shows that the highest-end properties in London can command as much as $5,860 per square foot, while similar properties in New York City garner a mere $5,276 per square foot.
Other central London properties cost about $2,300 a square foot, compared with $1,900 in New York.
For comparison, the price of the most expensive house on the market in Central Texas, a $13.5 million waterfront estate, works out to about $850 a square foot.
With the pound approaching the $2 mark for the first time since 1992, such exorbitant prices have kept many an American expatriate at bay.
“If we were to buy in London, we would lose half our down payment money with the current exchange rate,” said Erin Maury, an American who rents a home in London. “Unfortunately, at this rate, and with prices so high, there is no way we can afford to purchase a home here.”
Expected to set a new price ceiling in London is a four-tower development of 80 luxury apartments called One Hyde Park that’s going up in the ritzy Knightsbridge neighborhood.
The project, set to be finished in 2009, is owned by Project Grande and is being handled by Candy & Candy, a London development company known for its top-of-the-line projects.
Nicholas Candy, a founding partner, said attention to detail is one reason the company’s properties achieve record prices.
For example, some apartments will feature amenities such as “memory mirrors,” full-length video screens with a time delay, so the reflection one views is really a shot of oneself taken 10 seconds earlier.
Perks such as that, coupled with the property’s prime location, have many real estate agents predicting that One Hyde Park will be the first to command a price of 4,000 British pounds per square foot, or nearly $8,000.
Britain’s housing market has been red hot for more than a decade, with average house prices almost tripling since the mid-1990s.
Price gains have even been more stratospheric in some of the best parts of central London, neighborhoods such as Notting Hill, where average costs have risen more than 240 percent.
The trend has produced record average sale prices reaching $1.9 million, an increase of nearly 12 percent compared with this time last year.
The London market has showed no sign of cooling even as markets in New York and all across the United States are seeing property sales drop to their slowest pace in years.
Several factors are working in London’s favor.
One is the bonus bonanza expected this year for the bankers, traders and hedge fund managers who work in London’s financial district.
This week the British media reported that thousands of people in the finance sector were in line for bonuses of at least 1 million pounds, or nearly $2 million.
“Bumper bonuses are expected this year as London becomes the pre-eminent financial capital of the world,” said Robert Bailey, who also finds properties for wealthy clients. “People are finding they have lots of money in their pockets, and that there’s not much to spend it on.”
Another factor: billionaire Russians who have supplanted Arabs and American investment bankers to become buyers of the most expensive properties.
Liam Bailey, head of residential real estate at the Knight Frank agency in London, said that this year Russians have bought one of every five properties priced at or above 6 million pounds, or $11.7 million.
“Russians have gone from nowhere to becoming the biggest single overseas purchaser group in central London,” he said.
Finally, there’s the simple fact that there’s just not enough supply to meet demand.
Primelocation.com, a property Web site, said the stock of available property in central London is down by a dramatic 34 percent compared with last year.
Because London is unlikely to build higher, there’s little chance that housing stocks will grow.
“London is built low and the government has said high-rise buildings can’t be created in the center, so there is a real shortage of supply,” Bailey said. “But other cities like Berlin can create tower blocks of hundreds of properties, so they have a huge amount of available properties.”
Facing this reality, affluent buyers in London are grabbing up whatever property they can get.
Mike Spink, owner of Spink Property, a London develop- ment company, said he just sold an apartment near Sloane Square for $3,800 a square foot, and it’s not even on a garden square or in one of London’s most prestigious neigh- borhoods.
“There’s all sorts of evidence to show that buyers will pay whatever they have to,” he said. “That’s why I think prices will just continue going up.”
