San Francisco Bay Area values shot up 10.9 per cent from the second quarter of 2012 and 5 per cent from the first quarter of 2013, taking the average value of a luxury home there to $2.9 million. The year-on-year gain was the largest hike in values since the final quarter of 2005, as values edge closer towards the highs of 2007, First Republic said.

“The luxury market will continue to do well here because San Francisco has it all: It is an international city and we offer great value compared to places like, Shanghai, London and Hong Kong,” said Val Steele of Sotheby’s International Realty in San Francisco.

Ken DeLeon of DeLeon Realty in Palo Alto noted “continued robust demand” for luxury homes in Silicon Valley. “We have two major buyer pools: successful people in the technology business and international buyers from China,” he said.

San Diego – “promising”

The average luxury home in San Diego is now worth $1.7 million, after values jumped 8 per cent year-over-year and 4.9 per cent from the first quarter of 2013, according to the index.  

As was the case in San Francisco, the 8 per cent year-over-year hike was the largest seen since the fourth quarter of 2005, when prices spiked 13.3 per cent, the firm noted.

“Anything up to $3 million is selling quickly, but homes over that price aren’t selling as rapidly,” said Judy Corrente of Pacific Sotheby’s International Realty in La Jolla. “There is not a lot of product. Overall, it is looking very promising.”

Amy Green, of Coastal Premier Properties, added that momentum there has quickened, with more transactions and cash deals. “It’s very encouraging, compared to last year.  There are a lot of move-up buyers and many overseas buyers from Asia and Europe.”

Los Angeles – “astronomical prices”

While Los Angeles area values logged a smaller increase of 6.1 per cent from the second quarter a year ago and 3.3 per cent from the first quarter of 2013, the average value of a luxury home in the region is now higher than those in San Diego, at $2.1 million.

First Republic said LA values, on a year-over-over basis, have now risen for five consecutive quarters.

The market was especially strong on the west side, with properties above $5 million in Bel Air, Beverly Hills and Malibu up “10 per cent to 12 per cent,” said Mike Eisenberg of Keller Williams in Los Angeles. “I think we would have a bubble in the making if it were just local buyers, but we’re seeing a lot of multinational investors. Los Angeles values are inexpensive compared to other metropolitan areas around the world.”

Michael Collins, of Coldwell Banker Previews, added: “People want to be in the Palisades, Brentwood, Bel Air and Beverly Hills, and they will pay up. I’ve never see such astronomical prices in my 27 years in the business.”

First Republic Bank produces the Prestige Home Index each quarter with Core-Logic Case-Shiller.