June 27 (Bloomberg) -- Central London luxury home prices will increase by 8 percent this year as overseas buyers take advantage of a weak pound, broker Savills Plc said, reversing a November prediction that values would fall.
The average price of a home costing at least 3 million pounds ($4.8 million) and located in neighborhoods such as Knightsbridge and Belgravia rose 9.6 percent in the second quarter from a year earlier, Savills said. The quarterly gain was 3.4 percent.
“Overseas demand has been much stronger than we expected,” Lucian Cook, a researcher at Savills, said in a telephone interview. “The big unknown is what happens in Greece - will it be a catalyst for more demand because of the outlook for the euro region?”
Buyers based outside the U.K. have been competing over a below-average number of properties for sale in central London as they seek a haven for their wealth amid political and economic uncertainty at home. The pound’s 25 percent slide against a basket of other currencies since the housing-market peak in late 2007 has made London real estate more attractive.
In November Savills forecast a 1 percent decline for luxury apartments and houses in central London, predicting a pickup in the number of properties for sale and saying deteriorating economic conditions would deter British buyers.
Overseas buyers accounted for 72 percent of prime central London property purchases in the first quarter, compared with 60 percent three years earlier, according to Hamptons International.
British owners accounted for 55 percent of prime property sales in the city’s center. Instead of reinvesting in the same districts, they tended to move to more affordable neighborhoods within the capital, said Adam Challis, head of research at Hamptons.
Savills predicts that prices of homes valued at least 1 million pounds across the capital will probably rise by 6 percent this year, reflecting the shift and the gentrification of neighborhoods, particularly in southwest London.
“Displaced wealth is pushing up values beyond the center,” said Yolande Barnes, Savills’s head of residential research. “We would normally expect this to trigger a ripple of domestic wealth out of the capital, but this is only so far being seen in a few key commuter hotspots.”
Savills predicts that average values of prime residential real estate outside London will fall by 3 percent this year. In November it predicted a 1 percent drop.
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