Cahal Milmo, The Independent 7:06 a.m. EDT August 19, 2015
An inflatable pink pig, which was made famous on the sleeve of the 1976 Pink Floyd album "Animals," flies once again over Battersea Power Station along the Thames River in south west London, Monday, Sept. 26, 2011.(Photo: Joel Ryan, AP)
LONDON With its forest of cranes and mushrooming show apartments dangling plutocrat baubles from car lifts to Versace children's play areas, Battersea remains outwardly the buzzing epicentre of the property boom that has turned London into Britain's very own Monaco.
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 canceled.
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 ardor 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 ruble fall by 55%as a result of sanctions imposed following Moscow's annexation of Crimea.
Estate agent Knight Frank said purchases of prime London homes by Russians had fallen to 2.9%of the total in the first six months of 2015, compared to 6.7%in the previous period. Singapore-based buyers more than halved to 1.4%and Chinese investors dropped to 9.4%from 10.9%.
Sime Darby, which owns 40%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."
Nine Elms, which will host the new American embassy as part of a $3 billionredevelopment billed as the "greatest transformational story at the heart of the world's greatest city", has been the scene of some of the most feverishtrading 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 mosaic-ed 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.
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 10%to 20%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.
"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%, 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 3%drop in demand for housing worth $3 billionor more in a single month in May. Demand has fallen since May in some 60%of "prime" London boroughs, such as Westminster or Kensington and Chelsea.
Russell Quirk, founder of eMoov,said: "I don't think that there are many who will shed a tear for the well-heeled, sharp suited Mayfair (an exclusive central London neighborhood)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 re-balancing 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%of property in the City of Westminster, central London.
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 governmentlistof foreign companies and the land they own.
This story originally appeared inThe Independent.The content was created separately from USA TODAY.
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