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Saturday, September 22, 2012

Builders set sights on Asia as West is being hit by financial crisis

Next Wednesday, Fitzroy Place, London W1, will be launched in Britain, with apartment units advertised as £750,000 to over £12.5mil.

That same project was promoted in Hong Kong, Singapore and Malaysia four months ago. The fact that it was first launched in the Asia is very telling. As the global financial crisis continues to unravel in the West, there is the perception that Asia is flush with cash.

During a recent visit to the site, Savills' Hannah Smith says over 100 apartments have been sold with contracts exchanged, with a value of over £150mil. The units were priced at an average of over £1,700 per sq ft and up to over £2,850 per sq ft.

Smith says buyer profiles are a complete mix with multiple nationalities and include owner-occupiers, investors and empty nesters.

Singapore and Hong Kong buyers are equally divided and form a large number of Asian buyers, while there are equal numbers of Malaysians and Thais who have bought into the project.

When it was marketed in Kuala Lumpur, it was said to be one of the most expensive project to come by our way.

Unlike Kuala Lumpur, where properties can be simply divided as high-end, medium-end and affordable housing, the London residential property market, in terms of pricing, has many more tiers.

Says Richard Thomas, chief executive officer of Gatehouse Bank: “London has a complex residential market. There are many tiers and categories which cater to a wide range of investors. There are the 25-bedroom houses which are sold for £300mil. In this category, investors can pay anything. It is what I would call an unreal category and does not provide the real flavour of the residential market.

“Then there is the high-end serviced apartments like 1 Hyde Park at £7,000 per sq ft.

“There is the market between £2,000 and £3,000 per sq ft and below that, there are many other categories.”

The prices of properties in London have moved beyond the reach of many to the extent that today, many who work in London are living in other cities and commute one to two hours to work.

As more people from around the world descend on London, the demand for housing continues to grow. It is this demand for housing, both to live and to rent, and the need for the creation of new destinations that saw SP Setia Bhd, Sime Darby Bhd and the Employees Provident Fund (EPF) launching out together to create a new destination at the Battersea Power Station site.

Although centrally located with a nearby 200-acre park, the area has been left derelict for years due to unfavourable public transport connectivity.

Says Sime Darby president and chief executive Datuk Mohd Bakke Salleh: “It is a long-term investment. The future of the power station, both as a London landmark and the central focus of the ongoing revitalisation of the area, has never looked brighter.”

He says the timeline for the development is clearly laid out.

EPF chief executive officer Tan Sri Azlan Zainol says the attraction of the financial hub of London will continue to draw investors into the city's property sector.

“Since 2009, there have been promotions of London and Australian properties in Kuala Lumpur. We are not only selling to those who live in London, but to many other buyers around the world. There will be demand.”

BNP Paribas Real Estate senior director Andrew Cruickshank says as the European economy continues to face unprecedented challenges and the Middle East remains unsettled, London will continue to retain its position as a safe haven for overseas money.

“During 2011 and the first half of 2012, 60% of buyers in the prime central London market were from overseas,” he says, with overseas investment for the London residential market coming primarily from China, Hong Kong, Singapore and Malaysia.

It was this interest which prompted new developments to be usually first marketed in either Hong Kong or Singapore before being released to the UK market. Other investors are from Russia, Ukraine, India, Europe and the Middle East, Cruickshank says.

While European and Middle Eastern investors prefer period-built stock in more central locations, Asians usually prefer new off-plan purchases.

European buyers are predominantly from France, Italy, Ireland and Germany and the Middle Eastern from the United Arab Emirates and Saudi Arabia.

The number of Middle Eastern investors, especially Egyptians and Libyans, is increasing in central London.

UK-based investors are coming back into the market and comprise mainly investment funds and institutional investors.

Cruickshank says the shortage of housing within the city has resulted in developers converting office developments into residential properties. “They are also replanning consented office developments for residential. Westminster council is particularity supportive of office conversions.

“London boroughs are intent on selling surplus land and buildings, making them the biggest supplier of land in London,” he says.

He says the prices of residentials in prime central London increased by 10% in the 12 months to June this year while the average London residential rents increased by 4% in the same period.

By The Star

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