London House Prices Surge to Near Record High

By Svenja O’Donnell - Feb 20, 2012 6:55 PM GMT+0700

Asking prices for London homes rose to close to a record in February, helping push national values up the most in almost a decade, Rightmove Plc said.

Average asking prices in the U.K. capital rose 2.5 percent from January to 449,252 pounds ($710,300), less than 1,000 pounds below the record reached in October, the operator of Britain’s biggest property website said in a report today. Prices in England and Wales rose 4.1 percent on the month, the most since April 2002.

“Confidence in bricks and mortar in the capital seems set to continue, with ‘seller-power’ twice as strong in London compared to the rest of the U.K.,” Miles Shipside, commercial director of Rightmove, said in a statement. “Upwards price- pressure is likely to be maintained in 2012.”

A lack of supply is helping to prop up prices, while an increase in retail sales in January and better-than-expected services and manufacturing surveys suggest Britain won’t plunge back into a recession. Bank of England Governor Mervyn King said this week the economy should “gradually” recover this year.

The number of new property listings in London fell 9 percent in January from a year earlier, Rightmove said. This is an “early indication that shortage of sellers and upwards price pressure will again feature in 2012,” it said.

Nationally, home prices rose 1.4 percent in January from a year earlier to an average 233,252 pounds. In London, the annual price increase was 4.3 percent.

Capital Leaders

The London districts of Richmond-upon-Thames, Kingston- upon-Thames and Wandsworth recorded the largest monthly increases in asking prices within the capital, Rightmove said. Nationally, all 10 regions of England and Wales tracked by the company showed asking prices gained. The southeast led the increase, up 6.9 percent.

While Britain’s economy shrank 0.2 percent in the fourth quarter and unemployment held at a 16-year high of 8.4 percent, U.K. retail sales unexpectedly rose for a second month in January. Meanwhile, manufacturing returned to growth in January and expansion in services accelerated.

“The onset of the spring moving season generally leads to more ambitious pricing of properties coming to market, partly due to estate agents vying for new seller instructions,” Rightmove said. Search activity on the company’s website “indicates a pent-up desire to move that out-weighs the uncertain economic outlook,” it said.

In a separate release today, the Council of Mortgage Lenders said that while U.K. gross mortgage lending fell 14 percent to 10.5 billion pounds in January from the previous month, it was up 10 percent from a year earlier. A seasonal decline is expected in January, the London-based CML said.

“Should inflationary pressures continue to fall back, the squeeze on household finances should ease progressively and help support stronger economic recovery going into the second half of the year,” CML chief economist Bob Pannell said in the statement. “This can only be good news for the housing market further down the track.”

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net