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September 12, 2007

Expensive homes in London to be hit by credit crisis

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by Kay Mitchell

Expensive homes in London to be hit by credit crisis

Savills, the high-class estate agency, has warned that the turbulence in the financial markets will hit the top-end of the London housing market.

A spokesperson for Savills said that the credit crisis is already affecting commercial property deals and the expected decline in bankers’ pay could cut about 30% off the expected price rises of London’s most expensive homes.

Savills added that price increases of £1.8 million and above could come back from this year’s 15% to about 10%. There is a lack of good quality properties and if the city bonus people fall out, demand is high from wealthy Brits and overseas buyers.

Savills is acting for the Candy Brothers’ One Hyde Park development, penthouse flats are selling for £84 million. According to Savills, the development is nearly all sold. In addition, the Candy & Candy development at Chelsea Barracks and the £1 billion luxury redevelopment of Fitzrovia’s Middlesex Hospital are expected similar strong demands.

Commenting on commercial property, which accounts for 80% of Savills business, the outlook is very different due to the global credit crunch. Companies have found it far more costly to get the debt financing to purchase new offices and that is affecting the number of deals taking place.

Savills highlighted that things are not as bad here as in the US, but some people are concerned. The unsettling effect of the debt markets will take a month or so to work itself through.

Savills is the latest in the commercial property world to warn about the affect of the credit crunch. Developers Sergo and Hammerson have already announced falling demand recently.
Savills concluded that there would be no major crisis unless banks started cutting large numbers of staff.

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