An under-construction penthouse in London's One Hyde Park sold for a record $240 million last week. Developers believe that the 16,000-square-foot apartment could be worth $297 million once it completes work.
The latest high-profile sale is just an example of the frenzied property market of London.
This is not a sudden upsurge. The city's real estate market has been ballooning since the last six years. Citing Knight Frank's data, Market Watch is reporting that average property values are up two-thirds since the past five years and have doubled in the last 10 years. Values are up 8 percent on a year over year basis and are rising by an average one percent every month.
"We're in boom-time prices, more expensive than we've ever been in the history of mankind," Nick Candy, one of the developers of London's One Hyde Park luxury apartments told Reuters.
"There is a concern over the market overheating. Everyone thinks the main central London is doing so well, (so) the ripple effect is going throughout the UK, and some of the prices being achieved are probably unrealistic and not sustainable," Candy added.
Sellers are upping asking prices for homes to cash in on the surging housing market. Asking prices were up 6 percent in April this year. The rapid increase in prices has led to speculations of the city heading toward an asset bubble.
But experts from Ernst & Young say a bubble is nowhere in the vicinity. They claim that while the recovery is sturdy, prices are way below the record highs of 2006 and 2007. They also added that the recovery is fuelled by all-cash deals.
"The housing market is not experiencing a typical debt-fuelled recovery. Gross mortgage lending has increased but this has largely been financed by an increase in repayments by existing borrowers," Peter Spencer, chief economic adviser at Item told The Guardian.
"New mortgage lending remains at rock bottom while government initiatives such as the Help to Buy schemes will be having little impact on prices in London, where activity is fuelled by cash rather than mortgage borrowing," Spencer added.
Also, the supply in the housing market is relatively tight, which is restricting a full market take-off.
"Supply in much of the south is ridiculously tight, with for sale board blackspots in many popular locations within easy commuting distance of London. There are vicious circles where there is so little property for sale that few local home-owners are willing to come to market to trade up, exacerbating the shortages and boosting sellers' pricing power," Miles Shipside, director of Rightmove, the U.K.-based online real estate portal told the publication.
Part of the property market growth is being fuelled by foreign investment in the city. In a recent survey by the Association of Foreign Investors in Real Estate (AFIRE), London came in first on the list of the best city for foreign investment in real estate.
The statistics are all pointing to a buoyant property market in London.
