Slump hits pricey Lon­don prop­er­ties

National Post (Latest Edition) - - FINANCIAL POST - Anuradha Raghu, Jack Sidders Neil Cal­lanan and

Lon­don de­vel­op­ers, who are build­ing a record num­ber of new homes in the U. K. cap­i­tal, are find­ing it harder to at­tract buy­ers for the most ex­pen­sive prop­er­ties be­fore a sales-tax in­crease for land­lords and se­cond-home buy­ers in April.

Sales at the se­cond phase of Cap­i­tal & Coun­ties Prop­er­ties PLC’s Lil­lie Square pro­ject in the Earls Court district, where a two- bed­room apart­ment can cost 1.7- mil­lion pounds ($ 3.2 mil­lion), have not risen since Novem­ber, the com­pany said on Wed­nes­day.

“The chal­leng­ing con­di­tions seen in the res­i­den­tial mar­ket at the end of the year are ex­pected to con­tinue in 2016,” the de­vel­oper’s chief ex­ec­u­tive, Ian Hawksworth, said in a state­ment on Wed­nes­day. Shares in the com­pany fell 8.2 per cent to 315 pence in Lon­don, the low­est level since 2013.

The stamp duty sales tax will climb to as much as 15 per cent of the costli­est homes for land­lords and se­cond- home own­ers. It will add 90,000 pounds to the levy on a three- mil­lion­pound apart­ment and the higher charge fol­lows an in­crease for all buy­ers of lux­ury homes in 2014.

De­mand for Lon­don homes un­der con­struc­tion slumped by 19 per cent in the fourth quar­ter as prices and global mar­ket tur­moil helped damp de­mand.

“We are con­cerned by the sig­nif­i­cantly slower sales-rates at Earls Court,” James Car­swell, an an­a­lyst at bro­ker Peel Hunt with a re­duce rat­ing on the stock, said in a note to clients. “This is de­spite nu­mer­ous ad­ver­tise­ments of­fer­ing to pay stamp duty on be­half of the buyer and, al­though prices have held up so far, we re­main cau­tious.”

In south Lon­don’s Nine Elms, the district that incl udes Bat­tersea Power Sta­tion, there is “a messy shoot- out be­tween com­pet­ing de­vel­op­ers” for buy­ers in a neigh­bour­hood where 18,000 homes are planned, ac­cord­ing to Mike Prew, an an­a­lyst at Jef­feries Group LLC.

Tax in­creases hurt sales in the lat­est phase of the Bat­tersea Power Sta­tion pro­ject, ac­cord­ing to Sime Darby Group, which owns 40 per cent of the pro­ject. While 53 per cent of homes in Phase 3a have been sold, those priced above 1.5 mil­lion pounds re­main on the mar­ket, the Malaysian com­pany’s chief ex­ec­u­tive, Mohd Bakke Salleh, said on Wed­nes­day.

Buy­ers from Rus­sia and China are pur­chas­ing fewer apart­ments in Lon­don, Bakke said.

Bar­ratt De­vel­op­ments PLC sold homes at a pro­ject in Horse­ferry Road in the Pim­lico district at a rate of two to three a week in 2014, chief ex­ec­u­tive David Thomas said by phone on Wed­nes­day.

In a new pro­ject op­po­site that de­vel­op­ment, sales are run­ning at less than one a week, he said.

“We are still see­ing trans­ac­tions at a higher price point, but it is def­i­nitely at a slower rate of sale,” Thomas said.

The num­ber of homes un­der con­struc­tion in Lon­don rose by more than a third dur­ing 2015 to a record 60,300, ac­cord­ing to data com­piled by re­searcher Mo­lior Lon­don Ltd.

MATTHEW LLOYD / BLOOMBERG NEWS

Buy­ers from Rus­sia and China are pur­chas­ing fewer apart­ments in Lon­don, a de­vel­oper says.

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