April 16 (Bloomberg) -- London homeowners gained an average 76,000 pounds ($150,000) on the value of their property in the past year, triple the median salary, as U.K. house prices rose the most since 2003, the country's biggest property Web site said.
Asking prices for a home in the British capital reached an average 379,846 pounds in the four weeks through April 7, up 25 percent from a year earlier, Rightmove Plc said today. The cost of an average house in the U.K. rose 3.6 percent on the month and 15 percent from the previous year, the most in four years.
Three interest-rate increases since the start of August have failed to contain a housing boom that has driven up the price of a parking space in the London borough of Kensington and Chelsea to equal that of a home in the Midlands. Soaring property values are stretching mortgages to six times salary and prompting young people to live at home with their parents for longer.
``Wealthy ex-pats and local financiers are combining to produce huge demand on a very limited supply,'' said Alex Solomon, commercial development manager at Rightmove, in an interview. ``Affordability is increasingly becoming more challenging.''
In Kensington and Chelsea, asking prices jumped 10 percent on the month and 88 percent from a year earlier to reach an average 1,329,878 pounds, Rightmove said. The only district of London where prices fell from March was in the central area of Westminster, with a 1.7 percent drop to 806,431 pounds.
``There's not much you can buy in central London for under half a million,'' said Richard Barber, real-estate agent at W.A. Ellis in the Knightsbridge neighborhood of Kensington.
Parking at Harrods
Barber said his company helped sell two parking places near Harrods, the department store owned by Mohamed Al Fayed, for 200,000 pounds each.
``There is a lot of value in that,'' Barber said. ``If you have a 10 million-pound house in Knightsbridge, the chances are you'll have a very nice car worth around 150,000 pounds, and you're going to want somewhere to put it.''
The price tag almost matches the 199,588-pound average asking price for a home in the West Midlands, the area of England where Birmingham, Britain's second-biggest city, is located.
Prices are rising across Britain because of a shortage of homes. Current building plans in the southeast of England provide for 60,000 units a year, compared with potential demand of as much as 84,000 from a rising number of households, Nationwide Building Society, Britain's third-biggest mortgage lender, said March 28.
Gains in London have distanced property owners there from the level of housing wealth in the rest of the country and from those living in the capital who can't afford a home. The median gross pay in London last year was 25,150 pounds, about a 15th of Rightmove's average asking price, government figures show.
First-Time Buyers
The average value of a first-time buyer's house tripled in the decade through 2005 to 141,229 pounds, outpacing the 92 percent gain in average salaries across the country and leading more young adults to put off moving out of their parents' home for a place of their own, the statistics office said April 11.
British consumers, whose debts total 1.3 trillion pounds, are stretching themselves further to afford a house. Lenders including Royal Bank of Scotland Group Plc, the U.K.'s second- biggest, are now offering home loans at six times salary.
Investors and economists expect the Bank of England to raise interest rates for a fourth time as inflation holds above its target. Futures traders are speculating on a quarter-point increase to 5.5 percent in the first half. The implied rate on the June contract was 5.73 percent in London on April 13.
The contract settles to the three-month London interbank offered rate for the pound, which averaged about 15 basis points more than the central bank benchmark for the past decade.
Trading Up
Higher borrowing and home values may cool the nation's property market in coming months, said Miles Shipside, commercial director at Rightmove.
``Fewer buyers can afford to get on the ladder or trade up, and that will restrain ongoing increases in many parts of the country,'' he said. ``More affluent areas will remain the exception however.''
Demand from bankers spending last year's record bonuses and buyers from Russia and Middle East who don't need to borrow are driving prices up in the countryside. The average cost of a manor house has exceeded 3 million pounds for the first time, real-estate agent Knight Frank LLC said. Prices rose an annual 12.4 percent in the first quarter, the most since 2000.
Bankers and foreigners are also continuing to search for homes in Kensington and Chelsea. Estate agent Roderick Craggs, also at Knight Frank, said that viewings so far are ``very positive'' for a home with 11 1/2 bedrooms he put up for sale on April 11. The sellers are seeking 19.5 million pounds for the property, in the Holland Park neighborhood.
``There's little to buy in Kensington and Holland Park,'' Craggs said. ``It's increasingly obvious that once wealthy buyers get their dream home, they're not going to sell it. It's just supply and demand.''
To contact the reporter on this story: Jennifer Ryan in London at
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