Asian investors start to desert London property market due to strong pound
08-24-2015
But if the rumblings from within a circle of brokers and investors involved in the redevelopment of the south London former power station and the surrounding Nine Elms area are anything to go by, the legions of foreign investors credited - and blamed in equal measure - for driving the capital’s decade-long luxury property boom may finally be getting cold feet.
Sime Darby, one of the major stakeholders in the redevelopment of the 42-acre Battersea site, acknowledged a “softening of interest” in buyers from Malaysia and elsewhere in southeast Asia who had previously been responsible for the spending splurge which saw the area dubbed “Singapore on Thames”. The Malaysia based company insisted that none of its existing sales agreements had been cancelled.
But with one estate agent recording a 10 per cent drop in the value of luxury homes in Battersea and its environs in the year to June, experts blamed the cooling of ardour for buying up London’s high-end penthouses on the strengthening of the pound in recent months and economic volatility in the home markets of investors.
Among those hardest hit are Russian buyers, who have seen the rouble fall by 55 per cent as a result of sanctions imposed following Moscow’s annexation of Crimea.
Sime Darby, which owns 40 per cent of the Battersea project, said in a statement: “We are witnessing softening of interest among buyers from Malaysia and southeast Asian regions, probably due to the prevailing volatile currencies and uncertainty in economic outlook. No exchanged contracts have been cancelled to date.”
Aykon Nine Elms ascends to over 50 storeys Nine Elms, which will host the new American embassy as part of a £2bn redevelopment billed as the “greatest transformational story at the heart of the world’s greatest city”, has been the scene of some of the most febrile trading in the luxury property boom while less-monied Londoners struggle to get a foot on the housing ladder and essential workers face a dearth of affordable housing.
The area last month saw the launch of the latest development to attempt to catch the eye of the planet’s have-yachts in the form of the Aykon Tower - the capital’s first apartment building to be fitted out by Versace, complete with scatter cushions and a gold mosaiced swimming pool by the Italian fashion house.
Its Dubai-based developers insisted there had been strong interest in its 50-storey millionaires’ bolt hole. But the apparent broader waning of interest in Battersea makes it a bellwether for a broader “correction” in London’s hyperventilating property market.
Construction cranes working on a luxury development in Battersea (Getty)
Evidence emerged last month of a wave of “flat flipping” in the Nine Elms area, where developers are jostling to sell 18,000 new homes over the next decade, as investors who paid a ten to 20 per cent deposit sell on their not-yet-built property amid widespread concern that many of the properties have been bought as currency speculation “plays” by Asian investors and prices are likely to fall as they attempt to cash in.
One leading expert told The Independent that the status of Britain as a haven for foreign investors looking for decent returns in housing in the wake of the economic crisis was coming to an end and London property now represents a “risky” buy.
Paul Cheshire, emeritus professor of economic geography at the London School of Economics, said: “Conditions in financial markets and such low interest rates have converted property and especially top-end housing into an investment asset – yields are so low on such a wide range of assets.
The regeneration of the 42-acre Battersea Power Station site will see the construction of over 1,300 homes, a 160 room hotel and 350,000 sq ft. of retail and restaurant space (Getty)
“Given the very inelastic supply of housing in Britain in general and in London in particular… there is [now] a lot of risk in housing in England and the top end in London in particular.”
With economists predicting a fall in the price of prime central London property of 10 to 15 per cent, some argue that a long-awaited dose of real estate reality is already beginning to hit the capital. Online estate agent eMoov said it had recorded a three per cent drop in demand for housing worth £2m or more in a single month in May. Demand has fallen since May in some 60 per cent of “prime” London boroughs, such as Westminster or Kensington and Chelsea.
Founder Russell Quirk said: “I don’t think that there are many who will shed a tear for the well-heeled, sharp suited Mayfair type property predators. They have long crawled along the golden streets of prime central London, yet it seems that the tide has turned.
“London has been a Monaco in the middle of Britain. But what comes up must come down and we are now starting to see a rebalancing with other parts of the country.”
What remains to be seen is whether the Government’s recently-discovered determination to crack down on another factor in London’s attractiveness as a property investment - the ability of foreigners to hide “dirty money” in its shiny glass and steel buildings - will add to any cooling of the market.
Transparency International revealed last month that more than 36,000 London properties are owned by offshore companies in jurisdictions which protect the identity of their owners - including up to 9.3 per cent of property in the City of Westminster.
The research prompted Prime Minister David Cameron to express concern that properties in London “are being bought by people overseas through anonymous shell companies, some with plundered or laundered cash”. He pledged to publish a new Land Registry listing of foreign companies and the land they own.