Brokers, developers and estate agents have begun to whisper that the tower blocks of luxury apartments in Battersea and Nine Elms in south London will struggle to find buyers.
“This was always a crash waiting to happen,” said Charlie Ellingworth, of the agent Property Vision, who argues that a glut of luxury apartments has arrived too quickly. “The big off-plan tower blocks, I’m amazed that’s held up,” he said. “It all looks the same, it’s all expensive, it hasn’t been finished and some of it is in very rubbishy positions and they’ve been selling it at silly prices to very unsophisticated buyers, particularly from Malaysia.”
Investors from Malaysia and China have been bankrolling developments, buying up properties off-plan with the intention of selling some of them once they are built. Peter Burns, of property consultants CBRE, said: “You wouldn’t see the regeneration of Nine Elms without overseas capital. You can’t get debt to build a site unless you pre-sell.”
Nearly 20,000 homes are planned for Nine Elms. Most of the area is under construction, including Battersea power station. However, China has since suffered an economic slowdown, the Russian rouble has plummeted due to sanctions and Asian currencies such as the Malaysian ringgit have weakened against the pound. Fears are rising that some overseas buyers will not complete the purchase of their flats and the funding of future developments could become more difficult.
Property Vision estimates that there are 54,000 homes costing £1 million or more planned or under construction in London. Only 3,900 were sold in the sector in 2014, suggesting that a glut in Nine Elms is looming.
“There are going to be some casualties here,” said Robert Soning, of the developer Londonewcastle. “The developers haven’t thought about their game plan, the market is ridiculously over-heated and there’s too much stock.”
Selling prices in the postcode SW8 fell 7 per cent last year, according to the estate agents network LonRes, while 28 per cent of unsold properties have been on the market for a year.
Mr Soning said this meant that foreign investors were selling off flats without a profit. “This year there will be some pretty interesting discounts being given. I know some housebuilders who are already giving 20-30 per cent discounts, and I really do think that’s going to continue for the rest of the year.”
Ravi Govindia, the leader of Wandsworth council and spokesman for the Nine Elms Vauxhall Partnership, said: “Nine Elms is a central riverside district where two new Tube stations are being built alongside new parks and a network of cultural and leisure attractions. The area has huge appeal, demand remains high and people keep moving in.”
This article originally appeared on The Times of London.
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