London - Luxury home prices in central London rose on an annual basis for the first time in 17 months as bank and hedge fund executives bought houses and apartments in anticipation of bonuses, Knight Frank said.
Values of properties costing more than £1 million (S$2.3 million) were 1.6 per cent higher this month than a year earlier, the first annual increase since June last year, the London-based broker said in an e-mailed statement today.
Still, prices are 15 per cent below their peak in March last year.
'Anecdotal evidence from across our offices suggests that money is becoming more apparent as we get closer to the end-of-year bonus season,' Mr Liam Bailey, head of residential research at Knight Frank, said in the statement. 'Demand from senior management is driving the market.'
Bonuses for financial services employees in the City of London and Canary Wharf, the two largest financial districts, may rise 50 per cent this year to £6 billion, according to Knight Frank. Finance industry workers account for half the demand for luxury homes.
Prices rose 1.2 per cent this month from last month, the eighth straight month-on-month increase, Knight Frank said. The most expensive homes did not start recovering in value until May, the broker said.
Houses and apartments in Chelsea, Kensington and Knightsbridge, districts favoured by bankers, rose the most.
Luxury residences may return to peak prices in 2012, a year or two sooner than the rest of the British housing market, according to Knight Frank and Savills estimates.
The sterling's 19 per cent decline against a basket of currencies since the home market's peak has revived demand from foreign investors.
Source: Sunday Times, 29 Nov 2009