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London has become so expensive that some experts have called it the top of the market, yet an unwavering belief in the capital’s historic property charm persists. Taking a look at Knight Frank’s latest report, the emergence of 11 new above-£1 million (Dh5.2 million) London property postcodes, seems to indicate prices in the capital are showing little signs of abating, although the consultancy has started to tune down its price growth predictions for the capital. Many feel that London will become affordable to only a few, but others point out to affordable housing being created as part of deals with larger high-end schemes popping up.
“There is a lot of talk about a price bubble but what we really have is a welcome pause,” says Niccolò Barratieri di San Petro, CEO of Northacre. “A couple of years of price stability will help with salary disparity and capital values in Central London. It’s a question of demand and supply, and there still is strong demand. One sector of London’s real estate is likely to remain above speculations. Trophy property buyers are in for the long-term to become become prestige homeowners, and are less concerned about value fluctuations.
Jassim Alseddiqui, CEO of the Abu Dhabi Financial Group, says: “For us in the region, London is a true global city with fundamentals to continue what it has started, always remaining in the public interest. There are over 15 daily flights connecting the UAE to London.”
According to Knight Frank, £2.5 billion has been spent buying homes in Lon don, trumping other world hotspots, such as New York, and selling well over double the amount of plus £5 million valued homes in the first nine months of 2015, a trend the consultancy expects to continue for up to a decade.
Still, some concerns surrounding speculation that government could intervene, such as increasing stamp duty and taxes, which could soften prices further, remains. “The market in London continues to be attractive in terms of its lifestyle, business and education for domestic, as well as over seas purchasers, looking for a home or investment,” says Victoria Garrett, Associate Partner at Knight Frank, conceding that taxation changes may affect investors.
“But we need to put this into perspective. If you look at the cost of buying in London on a global stage it is still competitive on a tax perspective set out in the Global Tax report,” she explains. “And for those looking for a home it is a long-term purchase so the proposed changes in taxation and stamp duty have not had a strong effect on them purchasing.”
Barratieri concurs, describing tax changes, as well as currency fluctuations, as small bumps in the road in a city that has a thriving service and IT sector, financial and cultural hub. “London marries the old and the new well. Of course investors would prefer a weaker pound, but are buying a home crafted to give to their children, and in 20 to 30 years who knows what the exchange rate is going to be,” he says.
Currency fluctuations could merely change the percentage of where buyers come from at any given point in time. “A lot of buyers in Central London are foreigners but I don’t think volatility in currency is a major contributor to decision making, it’s just a part of the set of pieces considered and British residents also buy,” says Alseddiqui.
London is indeed in need of new properties for occupation as its population is expected to grow to 10 million. According to property consultant Arcadis £620 billion will be invested in infrastructure, commercial and residential property over the next 15 years. Yet, foreign investors are blamed for leaving property empty driving up prices, although investors at home have been equally snapping up property. “It’s a myth that foreigners are suddenly buying everything in London, they have always been part of buying there historically,” says Alseddiqui.
As a developer Barratieri is well aware of the owner-occupier debate and is in favour of creating vibrant occupied developments, which was best done by selling in situ. “Prospective buyers should be residents, or those coming regularly to London, not just someone wanting to park $10 million in London. They come rarely and don’t let them because a 3.5 per cent rental yield is not worth it, they don’t need the money. This does happen a lot and it’s disappointing to go past something with few lights on,” he explains.
“We’re doing our fair share. Our developments, such as The Lancasters, are 65 per cent occupied, that is more than double compared to others,” he adds. Barratieri attributes the high occupancies and sales success to creating scarcity value in the face of competition.”
Living next to the Queen
Developer Northacre’s majority shareholder Abu Dhabi Financial Group has been in the business of creating luxury niche homes, over 700 of them spanning one million square feet at a tune of £2 billion, over the last 25 years. The magic lies in mostly reviving existing historic buildings, keeping the façades and creating modern luxury homes within, with desirable address names such as The Phillimores, Observatory Gardens, Earls Terrace and Kings Chelsea. Its latest project under development, No.1 Palace Street, offers prospective owners a true piece of history, as the developer revives the former Palace Hotel built in 1861 and listed as a Grade II building. Sitting on a 300,000 square feet island the property overlooks the gardens of Buckingham Palace, mirroring its looks from architecture reminiscent from the Renaissance to the contemporary eras.
“It’s about bringing buildings back to their former authentic glory, yet adding all the latest tech apps to provide modern services. Start ed by an architect, we’re not just developers but a design led firm. Today is not just about selling walls but a lifestyle, a club life with services, creating destinations and value for those who buy from us,” says Barratieri. The developer’s own interior design division, N Studio, is drawing up an array of leisure facilities spread over 10,000 square feet, including what it terms a 6,500 sq ft ‘haven of wellbeing’. A butler service will also just be a call away.
The 72 apartments to be completed in 2018 will offer a sense of grandeur with plenty of large windows and ceiling heights ranging up to 4.7 metres. The residence will house everything from a 750 square feet studio to a 4,000 square feet penthouse. “The bedrooms are very substantial in size six by eight metres, we want to create a sense of space,” Barratieri describes. One of the studios has been sold for £2,950 per square foot (around £2,2 million), whilst one of the penthouses has gone as the most expensive property sold to date at £20 million.
Although the developer prefers to sell once the project has completed, since April it has already sold 40 per cent. “One in every 3.5 people visiting our market ing suite ends up buying. Although we have sold to buyers from Africa, Russia and Hong Kong, most, like UK residents, are visiting the site. We also receive a lot of interest from the US and the Middle East in our projects,” says Barratieri.
“We haven’t done a big marketing splash but a lot of our projects sell through word of mouth through existing clients.”
Northacre’s next big venture will be transforming the headquarters of New Scotland Yard it bought for £370 million last year into another residential haven. “We’re expecting a response within the next few months, its an exceptional scheme with the best views in London,” says Barratieri.
Living in Richmond Park
The recipe for success, never mind where the London market heads, seems to be lying in creating luxury niche homes in historic buildings; the Star & Garter developed by London Square also fits this bill.
“This is the point of view my clients have been taking. This is a long-term purchase bought to be a home first and foremost,” says Garrett, in charge of marketing London projects in Middle East and North Africa region.
The Star and Garter, another Grade II listed protected building overlooks the park and the Thames, and will feature 86 luxury apartments and duplexes, many with private terraces promising a boutique hotel-like lifestyle.
“It is a truly unique and the first super prime development of its kind outside of prime central London. The quality of finish, location, views and facilities are second to none. Looking at Richmond the property price growth outperformed prime central London last year, and we are forecasting a growth of 22.9 per cent across London between now and 2018,” says Garrett.
As a restoration project the building will maintain some of its historic features, such as the king’s room to transform into an opulent spa. The terrace garden and grounds will also be restored. Prices start from £1.3 million for a one-bed apartment, two-beds from £1.75 million, and three-beds from £2.45 million. The development was already 50 per cent sold, when it was marketed recently here in the UAE.
Source: Nicole Walter, Special to Property Weekly