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London Real Estate Is Crazy Expensive

Luxury Residential Properties In London As Bank Of England About To End The Era Of Record-low Borrowing CostsLuxury Residential Properties In London As Bank Of England About To End The Era Of Record-low Borrowing Costs
Residential properties in the Kensington and Chelsea district of London.Photograph by Simon Dawson — Bloomberg via Getty Images

The real estate market has been heating up again. According to real estate site Zillow, median house prices in San Francisco are up 11.2% year over year. New York saw an 8.6% increase.

But that pales in comparison to London’s market, where average housing prices are up 13.5% year over year, according to the just-released U.K. Land Registry House Price Index. Even that may be understated, as the index does not include newly-built homes.

The average home price in London hit $762,810. That makes the city’s year-over-year price increase almost $719 a day. That’s while wages grew only 1.6% over the last year.

Not that everyone is counting their increased net worth. Property values fell 0.8% in tony central London neighborhoods and aren’t expected to recover through the rest of 2016. And prime home prices across all of London fell 0.3% in the first quarter and are down 1.2% since the peak in 2014, all over worries that the U.K. will leave the European Union.

Still, overall prices remain sky high.

To put the housing costs into an international perspective, the median sale price for a single-family home in San Francisco is $991,750, according to Zillow. But an important reason prices are so high there is the lack of space to build. San Francisco is just under 47 square miles in size. London is 607 square miles, double even the size of New York City, where the median sale price is $549,200.

According to U.K.-based real estate site Zoopla, there are houses on the market running as much as $57 million.

However, when it comes to apartment rentals, London prices are less stratospheric. The median cost to rent a one-bedroom apartment in San Francisco is about $3,500 a month. In New York, it’s close to $3,200. In London, the price is about $2,185.

The price pressure is spilling over into neighboring suburbs, where house prices jumped as much as 17.2% and 19% as buyers skipped out on London. Many are trying to find less expensive properties still within commuting distance of the city.

“London will remain a formidable bastion of the UK’s property market but for many, its prices are an insurmountable obstacle,” Mark Posniak, managing director at Dragonfly Property Finance, told the BBC. And that doesn’t look like it will change significantly in the near future.