We’ve argued that the next shoe to drop in the real-estate crash will be the high end, where many in-denial sellers are now “renting for a year until the market comes back.”
The situation in London, however, will give these rosy-eyed sellers some encouragement.
According to one London market participant, the city’s high-end real-estate is seeing a v-shaped recovery, as the weak pound lures foreign buyers. Prices are now down only 11% from the peak.
This seems like a London-specific phenomenon–world financial hub, collapsing currency–but the same might soon be said for New York.
Peter Woodifield, Bloomberg: London’s luxury homes this month sold at the fastest pace since the market started to slide more than two years ago as overseas buyers took advantage of a weakening pound, Knight Frank LLP said.
About 250 homes and apartments costing more than 1 million pounds ($1.6 million) were sold during August, compared with about 75 a year earlier, said Liam Bailey, head of residential research at the London-based broker. Prices increased in August for a fifth straight month, reducing the annualized decline to the lowest since October.
“The combination of rising prices and increasing confidence in the central London market has had a dramatic impact on the number of sales which have taken place,” Bailey said in an e-mailed statement today.
Thousands of bankers and finance industry workers, the main buyers of luxury homes in the U.K. capital, have lost their jobs since the start of the credit crunch in 2007. Foreign buyers now account for more than 40 per cent of purchases as they take advantage of the pound’s 11 per cent drop against the dollar and 8.5 per cent fall against the euro in the last 12 months.
Luxury home prices fell 15 per cent in the five months following the collapse of Lehman Brothers Holdings Inc. in September, said Knight Frank. They have gained 4.7 per cent in the past six months including a 1 per cent month-on-month increase in August. Prices were down 12 per cent from a year earlier, the smallest drop since October when they were 11 per cent lower.
“We are at the beginning of a V-shaped recovery,” said Stephen Yorke, chairman of D & G Investment Management. The company manages the 10 million-pound Prime London Capital Fund, owner of eight rental properties in Chelsea, Knightsbridge and Belgravia.
The house in the picture above, by the way, can be yours for only $150 million.
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