The Hottest Property Market in the World
By Tom Dyson
February 2, 2007

A friend and his wife are trying to buy a house in London. We met up in a pub last night. Over a couple of pints of Old Hookey and a small bowl of mixed nuts, he told me what trouble they've had...

"We'd already sold our flat and the new owners were pushing to move in. So we didn't have a lot of time. We had to find something quickly.

"We decided we'd make a point of visiting houses the first day they came on the market... to give us the best chance of closing a deal quickly. The estate agent would call us the night before, and we'd arrange to see it during our lunch break the next day.

"So that's what we did. Problem was, every time we arrived at a house, three other couples had already been before us, and there'd already be an offer on the table... always much higher than the owner's asking price. On one house we looked at, buyers had offered seventy-five thousand quid over the asking price! It was ridiculous. It happened several times. We never had a chance.

"So then we looked at houses before work... at 7 a.m. We got lucky... last week, we had an offer accepted... now we're trying to close the deal as fast as possible before someone trumps our offer..."

My mum said the same thing about her house in Chiswick. Last week, she invited an estate agent to come over and give her a valuation.

"You'll probably get half a dozen offers on the first day, and we'll sell it in less than a week," said the lady.

Ultra-luxurious Manhattan homes – on Fifth Avenue, Park Avenue and Madison Avenue near Central Park – cost about $1,870 a square foot right now. Recent sales of comparable property in London hit $5,900 per square foot, says the Associated Press.

According to London-based real estate broker Knight Frank, prices of London housing rose 29% last year... the fastest rate in 27 years. And the average price of a house in London is now $600,000.

The best parts of town have done even better. Property website Rightmove showed that the average asking price for a house in Kensington & Chelsea – one of London's most expensive boroughs – stands at $2.2 million dollars... up nearly 62% from the same time last year.

Compare this to a story published by The Daily Reckoning yesterday. One of the writer's friends was trying to sell his house in Florida:

"We gave up," said the seller. "We had our house on the market. We tried to sell it ourselves. Then, we put it with a realtor. But there were nearly a dozen other places for sale on the same block. Almost all of them were empty. We just figured that this was not the time to sell. So we put our house up for rent. It's not ideal because now we have to manage rental property, which we don't want to do. But it's better than losing money. Of course, right now... it's still empty. We haven't found a renter yet."

When I was in London a year ago, the market had turned down and people were worrying about a long-term decline... and the press were full of stories just like the one in The Daily Reckoning... except they were talking about London. But as you can see, everyone got it wrong in London. The market turned around and now it's hotter than ever. 

So I think the same thing could happen in America. The property market proves everyone wrong and starts going back up again... especially in places like Manhattan where space is limited.

As London shows, the global real estate boom is still alive. Don't bet against it.