International Property

Luxe London homes still attractive for Chinese investors despite market slowdown

PUBLISHED : Tuesday, 24 May, 2016, 12:15am
UPDATED : Tuesday, 24 May, 2016, 4:49pm

Premium residential projects in London continue to attract Chinese investment even as a stamp duty hike and political uncertainties have slowed down sales in the market.

Battersea Power Station, a decommissioned coal-fired power plant in London, is currently being redeveloped into a mixed-use site of residential, commercial and retail properties on the south bank of River Thames.

The £9 billion (HK$101 billion) project, covering 42 acres, will boast 4,500 homes at an average price of £1,600 per square foot. These will account for 53 per cent of the project.

Buyers from Hong Kong and China have snapped up around 120 out of the 1,500 homes already sold since the project launched in 2013, according to Battersea Power Station Development Company.

“We’ve had fantastic interest from Chinese investors [as they] are very used to large scale mixed-use regeneration projects,” said Rob Tincknell, chief executive officer of Battersea.

This is despite a slowdown in London’s residential market as an additional 3 per cent stamp duty surcharge came into effect in April and as Britain faces an upcoming decision on whether to stay in the European union.

Sales declined year-on-year by 22 per cent in the second half of last year and have continued to fall at a sharper rate in the first quarter, according to analysts at real estate agency Jones Lang LaSalle (JLL).

The UK’s potential exit – termed Brexit – from the 28-member group of nations will be settled by vote in a referendum on June 23.

“Until [the Brexit conversation] is resolved, many investors have decided that now is time to hold back,” said Adam Challis, head of residential research at JLL in the UK.

Battersea CEO Tincknell said that despite the slowdown in the market, they have made 110 million pounds worth of sales since November, with sales transactions three times the projected amount when the site was bought in 2012 by a Malaysian consortium.

“We’re not chasing the market. We’re very confident about our product,” said Tincknell.

However, large regeneration projects like Battersea have a tendency to go through cycles where price growth is weaker, Challis said.

“Prices are not moving up at the rate they were moving two to three years ago. That will start to change as the scheme comes to completion. In my view, it still has a lot of long-term value growth,” he said.

The property’s capital value is expected to rise by at least 10 per cent as a new underground tube station and as the project’s retail and office space is slated to fully open by 2020, according to Battersea.