Investors certainly want to make a quick profit from house and land purchases but luxury apartments in South London’s Nine Elms District which is Europe’s largest project for prime new homes are facing long waits from buyers. About 30% of the properties are languishing in the market for more than a year and according to real estate data provider Lonres, the numbers do not include the sales made by developers.
International investors who have purchased half of all new homes in central London in 2013 are discouraged by the high prices and the increase in sales tax. Currency turmoil on the emerging markets is weighing on the sales. Malaysian investors have purchased almost a third of the 866 homes in the first phase of the district’s $12 billion Battersea Power Station project are now seeing the surge in costs by as much as 30% as the pound strengthened against the Malaysian ringgit.
The biggest source of demand for house and land packages are foreigners but that seems to be waning. Locals are very unlikely to mop up the rising supply because they are expecting increases in interest rates over the coming year.
At Nine Elms, homebuilders have planned for 18,000 homes including 4,000 at the Power Station development with properties costing from £495,000 ($762,000) for a studio to £30 million for a penthouse. Homebuilders went on roadshows with Chinese and Singaporean investors before construction commenced.
However, with the slowdown in China it is expected to trigger a major upheaval in global currency markets. In April of this year, the pound has gained 8% against the Chinese Yuan and the same amount against the Singaporean dollar.
According to homebuilder Redrow Plc they are avoiding buying land in the district because of the sheer volume of construction. Investors who have made down payments two or three years ago need to sell their contracts prior to taking delivery because they want to avoid the sales tax. The stamp duty on a £1 million home is £43,750. Owner-occupiers will not buy a property now that is expected to be completed in two years’ time while those who have bought properties are gambling on the eventual increase in prices.