Britain’s biggest housing development area, Nine Elms in London, is seeing a wave of “flat-flipping” as investors try to sell unbuilt properties amid fears the capital faces a glut of expensive homes.
Nearly 20,000 units are under construction at Nine Elms, on the south bank of the river Thames facing Chelsea — the equivalent of a new garden city. The project describes itself as “the greatest transformational story at the heart of the world’s greatest city”.
Many of the flats have been reserved by foreign investors, who usually pay a 10-20 per cent deposit but do not need to find the balance until construction is complete. Selling the home on before that suggests the buyer wants to get out of the deal, agents say.
House prices in London’s most expensive areas fell in the second quarter of this year for the first time in more than half a decade, recent research for the Financial Times by data provider LonRes found. At the same time, developers have embarked on a building boom: more than a decade’s worth of high-priced homes are being built across the capital.
The market wobble has begun to feed through into buyers’ sentiment: a third of the homes for sale on property portal Rightmove in the Nine Elms area are resales of as-yet unbuilt high-rise apartments, an analysis by the Financial Times has found.
Some of these homes will be duplicate listings but estate agents familiar with the area said they were seeing high volumes of previously sold flats back on the market.
Ed Mead, a director of estate agent Douglas and Gordon, said the Nine Elms area was “getting a bit silly”. Prices were “wildly out of kilter with what homes in the surrounding areas are selling for”.
The number of as-yet unsold flats being put up for resale suggested that “some people do feel vulnerable”, he added. “There is a weakening of sentiment.”
Charlie Ellingworth, a partner at buying agents Property Vision who has dubbed Nine Elms “Singapore-on-Thames”, said that buying off-plan was “the ultimate option play” for “a lot of the buyers [who are] Asian”.
“You only need to put down 10 per cent and then see how the market goes,” he said.
A lot of these buyers are effectively taking a financial position rather than buying a property– Henry Pryor, an agent who acts on behalf of wealthy buyers
The Nine Elms area is particularly prone to speculative buyers, he added: “It’s a dog-basket of developers all whacking stuff up, all jam-packed against each other, and walking out of the door and trying to find a pint of milk is really hard. Looking at what’s coming out of the ground, I wouldn’t want to live there and not many people we talk to want to buy down there.”
Henry Pryor, an agent who acts on behalf of wealthy buyers, said that some foreign investors treated apartment pre-sales as “currency trades” and “currency speculation”.
“A lot of these buyers are effectively taking a financial position rather than buying a property,” he said, warning that “investing for capital appreciation rather than yield is gambling” and predicting that the future for house prices in Nine Elms was “down”.
“If you can find some other patsy then my advice would be absolutely to [sell],” Mr Pryor said. “As long as the music keeps on playing, everyone is happy but at some point the music stops.”
The highest number of unbuilt apartment resales listed on Rightmove on the random day this month that the FT chose to analyse were at the Battersea Power Station redevelopment, where a Malaysian consortium is turning 42 acres of urban wasteland into 4,000 homes and 3.5m sq ft of shops, restaurants and offices.
The company building the power station scheme, Battersea Power Station Development Corporation, has its own in-house estate agent that is marketing some of the resales.
BPSDC said the agency, Battersea Power Station Estates, “has been created to support all those buyers of homes at Battersea Power Station whether it be in lettings, resales, management or providing ancillary services such as furniture packages and interior design”.
“As with any new-build development which is marketed off-plan there is always a demand for resales, the majority of which have been to local purchasers who want to become part of the growing Battersea community,” she said.
Other developments with large numbers of apartments on the market listed as “resales” were Ballymore’s Embassy Gardens and two schemes by Berkeley Group — Riverlight and the Tower at its One St George Wharf project.
Ballymore and the Nine Elms Partnership, which co-ordinates development of the area, declined to comment.