Is London Looking More Like Singapore?
London’s residential property market looks a bit different these days, with new developments around the city increasingly offering the condominium-style living typically seen in Asia and some other parts of the world.
Asian developers have almost 25 percent market share in the new build market, according to Hanover Private Office, a leading property acquisition firm based in the U.K.
And analysts say that share is likely to grow – to meet high demand for new homes in the British capital as well as to take advantage of the strong interest in London’s real estate market from investors in Singapore, China and other Asian countries.
“Since 2009, overseas purchasers of new build residential in Central London helped sustain the market at a time when there were fewer domestic buyers.
Developers have therefore had overseas buyers in mind when designing developments in Central London, and will often consider a specification and include facilities that appeal to this market,” says Selina McFall, associate director – investment manager at IP Global, an international property investment firm.
“For example, high end apartment buildings in Asia often include residents’ facilities such as a gym, but historically such features were not typical in buildings in London.
The inclusion of these types of facilities therefore appeals to Asian buyers,” she added.
Indeed, the glossy flyers often found in the mail boxes of Singapore’s high-rise condominiums advertise luxury apartments in London offering such facilities.
Whether it’s to buy as an investment property or a home for a child studying, London real-estate has
seen strong interest from Asian buyers in recent years – driving up prices and fuelling a debate about affordability for locals.
Savills estimates that annual house price inflation in London to stand at 15 percent by year-end, above the 8.5 percent it forecast at the start of 2014.
The top five buyers in the prime London re-sale and new-build market in the year to November 30 were U.K. residents at 47.9 percent, followed by nationals from China at 11.5 percent, Hong Kong and Russia at 5.2 percent each and Singapore at 3 percent, data from real estate firm Knight Frank shows.
Two Malaysian firms are behind the high-profile £10 billion ($16.2 billion) redevelopment of London’s Battersea Power Station into shops, bars, offices and residential units.
Work on the regeneration of the iconic power station, for which previous projects failed, began last year and is expected to be completed by 2025.
Singapore-based Oxley Holdings meanwhile unveiled in late 2013 a £200 million plan to develop a 40-acre site in East London’s Royal Docks into about 3,400 homes, and also commercial and retail facilities.
“Visiting Battersea Power Station a few weeks ago with a client, one can’t not be interested and impressed with this development,” said Will Watson from the U.K.-based property search firm Middleton Advisors.
“But there is a concern shared with some buyers that all the flats bought by investors could potentially sit there empty and parts of the development could feel soulless at times.”
According to Watson, there are approximately 250 applications for new developments around London awaiting planning approval, about 135 of which are for “skyscrapers.”
“By 2030 London will be the first city in Western Europe to be home to ten million people and Asian investment, together with traditional institutional finance, is helping to unlock developments that have stalled for many years, allowing thousands more homes to be built for Londoners far sooner than would otherwise be possible,” said London’s Deputy Mayor for Planning Edward Lister.
According to IP Global, the housing shortfall in southern England is estimated at some 160,000 houses, 72,000 of which are in London.
“Investment from companies such as SP Setia at the Battersea Power Station, Knight Dragon at the Greenwich Peninsula and Oxley Holdings at Royal Wharf are reflective of London’s strong investment opportunity and good relations between the city and Asian countries,” Lister said.
Reflecting closer investment ties between London and Asia, London Mayor Boris Johnson in early December completed a trade mission to the Far East that included Singapore and Malaysia.
He also unveiled that the public space at the heart of the Battersea Power Station development is to be called Malaysia Square.
Coming of age
Analysts add that the success of the Battersea project, which has seen strong interest in Asia, may help draw other Asian developers to Europe.
“It is rather significant as the project has done very well globally and has also gained good publicity worldwide,” said Doris Tan, Head of International Property Services, at Jones Lang LaSalle in Singapore.
Asked why more Asian developers are looking at Europe to invest, Liew Kee Sin, chairman of the Battersea Project Holding Company, described the move in a recent BBC interview as part of “growing up.”
“We have lots of investments in Malaysia, Singapore, also Australia. But it’s time for us to open ourselves and see the world and see if we can compete internationally,” he said in the television interview.
There are a host of reasons why foreign developers looking at Europe would set their sights on London first such as transparency and culture, analysts say.
“London is typically the first port of call for overseas developers who want to expand into Europe and there are no signs it will lose this position of dominance,” said Tom Bill, Head of London Residential Research at Knight Frank.
Watson at Middleton Advisors adds this note of caution to potential developers: “Competition is fierce. Ten years ago we didn’t have apartment buildings that offered state of the art facilities or concierge services, so a developer contemplating London has to be ahead of the times and raise the bar with each new scheme.”