Luxury Real Estate Recovers in London Says Bloomberg

The media continue to talk up the luxury real estate market with some pretty fantastic – and I use the term in it’s literal sense – headlines amidst question marks, false positives and negative predictions all of which add to the confusion and serve the opposite purpose to that which was intended. The latest headline from Bloomberg reads, “London Luxury-Home Prices Rise on Lack of Properties,” and goes on to say,  “Luxury-home prices in central London rose 4 percent in the third quarter from the previous three months as buyers competed for fewer properties,” according to Savills – which is a half truth at best.

Average sale prices of  very small volume of sales were up 4%. The biggest quarterly increases were in the districts of Chelsea, Kensington and Belgravia in west London. Savills August report stated “prime central London has so far led the recovery in UK house prices where values rose by 4.3% in the three months to the end of June 2009.” Below this post is a chart from the Land Registry showing average prices and sales volumes for properties in The Royal Borough of Kensington and Chelsea, and as can clearly be seen sales volumes are at the lowest point since records began being kept. So – a 4% rise in the second quarter to June and a 4% rise in the third quarter would rather contradict the Land Registry figures.

I still think the media and real estate consultancy’s  tendency to talk up the market is exacerbating the problem. The market is all but stalled and we should be looking for realistic sellers rather than easily-duped buyers. According to Rightmove, one of the largest online brokerages in the UK, and who claim to have a million properties for sale, 650,000 in the UK alone, “Many aspiring sellers could face years trapped in their homes until values rise enough for them to join the equity-rich club, and even then they will be heavily dependent on the number of bottom-of-the-chain first-time-buyers. Confidence is up, stock is down, and the number of people searching is high. There are lots of positives but too few buyers can put down the 40% deposits that are needed in order to secure the best mortgage deals. Finance greases the wheels of the property market, and it is anybody’s guess when we might see the necessary level of competitive funding return. Frustrated home-hunters should note the expected ten year timetable to wind up Lehman Brothers, giving a clear indication of the time required to rebuild the banking system.”

With sales in the UK currently around 40,000 units a month, it does not take a genius to work out how long it will take to sell 650,000 – 16 months, and the amount of bank owned properties waiting to be repossessed is quite substantial. We are going no where until such times as British property prices are allowed to correct..