A lack of available properties on the market has been credited with causing a jump in the value of luxury homes in parts of California over the past year.

A lack of available properties on the market has been credited with causing a jump in the value of luxury homes in parts of California over the past year.

According to the First Republic Prestige Home Index - conducted during the fourth quarter of 2013 - luxury properties in San Francisco, Los Angeles and San Diego have rocketed in value in a year, with prices almost reaching record highs.

With all areas seeing at least a consecutive second quarter of double-digit gains, private bank and wealth management company First Republic attributes the boom to robust demand and low interest rates, as well as limited inventory.

The finite number of luxury properties available has led to those in San Francisco and Los Angeles selling far above the asking price, with multiple offers from potential buyers.

In the ever-growing Silicon Valley in San Francisco, offers were between 20 and 40 per cent above asking price as the money generated in the technology region and foreign buyers continue to flood in, with little choice for potential homes.

Overall in the area, value of properties in the San Francisco Bay area climbed from 12.4 per cent from the fourth quarter of 2012, and 1.8 per cent from the third quarter of 2013.

Similar scenes could be found in Los Angeles, with a 13.7 per cent year-on-year increase. In Beverley Hills, houses that sold for $10 million in 2005 and 2006 are now valued and going for between $20-25 million. However, in Orange County, warnings were raised of a slowdown.

“There are plenty of buyers and not enough inventory. Homes at $4 million are selling above their comparables from last year. The attractive properties are generating multiple offers. I see some buyer resistance now and expect the market to level off,” said Ron Millar, of HOM Sotheby’s in Newport Beach.

Despite the strongest yearly gain of the three areas, with values increasing by 16.6 per cent, demand varied in San Diego between luxury homes valued at $3-5 million, and those at $5 million and above. While the lower-valued properties had depressed supply and growing prices, properties at the higher end of the spectrum were plentiful with modest price rises.

Figures given by First Republic indicate that, despite a continued increase in luxury property values over the fourth quarter of 2013, the majority of the gains made over the past year were in the first nine months.

San Diego and Los Angeles both saw a quarterly rise of 1.3 per cent and San Francisco stood at 1.8 per cent, compared to the double-digit figures seen in the annual climb.

Average values of luxury homes in the three regions were $3.1 million in San Francisco, $2.3 million in Los Angeles, and San Diego pulled up the rear with $1.9 million.

First Republic Bank produces the Prestige Home Index each quarter with Core-Logic Case-Shiller, a provider of automated property valuation services and home price metrics to US financial institutions.