They don’t appreciate as quickly as period houses but the market is mad for them!
London may be one of the world’s most multicultural cities but, architecturally speaking, it is one of the most conservative – and proud of it. Even as our population has shifted and swelled, and scores of residents and shops come and gone, the buildings have stayed the same, our residential landscape largely restricted to white period town houses or converted council flats.
After decades of conservation, speculation and overpopulation, however, the model has reached breaking point. We now face a housing crisis of epic proportions, with less and less land to build on and more and more people to cater for.
According to recent research by Savills, we need to be building at least 50,000 new homes in London each year – twice as many as we are currently building – leaving little room for the terraced homes we so adore.
But crises breed opportunities, and a growth in demand – both foreign and domestic – has nudged us to change our tastes and to turn a forbidden flirtation with contemporary building design into something resembling a lasting love affair. London is no longer trying to hide its dirty little modern secrets, instead showing off its new builds all over town.
Who would have envisioned a 58-storey sky scraper in Nine Elms just a few years ago, or the Shard’s 10 apartments that hover so high above London that they can see the sea?
And away from the tourist trails, a more subtle revolution is taking place, as new builds rise up in central London and other high-end postcode. They are working to plug an insatiable foreign demand for London homes.
So with a market hungry for them, are these contemporary creatures a good investment? And, if so, how can you make sure you’re on the right side of the new vs. old property divide?
The rising new build superstars
The Barbican’s Roman House is a prime example of the trend for modern living. Once a symbol of post-war reconstruction, the complex had come to look like another sign that Britain could not change with the times. Keep Calm and Build On – only when necessary.
Then developers Berkeley Homes stepped in. It is currently in the process of refurbishing the site and turning it into a 90-apartment complex. Roman House will have a gym and all flats will have their heating and electronics controlled electronically by devices like iPads or smart phones. It is a concept for a “high-octane” world, remarkably different from anything envisioned by its 1950s architects, let alone the original Roman builders that first raised the wall that still partially stands around the Square Mile.
That wall now acts as a unique selling point for the site, set to be completed in 2018. It’s part of the reason developers are hoping to fetch between £565,000 for a studio apartment and £4.5m for a penthouse.
Not too far from Roman House, another city development is also booming. The Heron (no relation to Heron Tower) boasts a private club and roof garden, plus a 24-hour concierge service to match. Both have helped the building become a firm favourite with foreign investors and the City clique. The views across town are spectacular and interiors spacious. Despite costing more than double the London average per square meter, two thirds of apartments were sold two years before the building was ready for occupancy, irrespective of the £495,000 price tag for a one-bedroom flat or £3.25m for a three-bedroom apartment.
The Heron, much like its Roman House neighbour, is rising up from a dated building which had gradually grown less desirable to live in since its 1950s heyday. Both developments have been fortunate to have unique selling features and to be part of the Barbican-wide property revamp.
London’s luxury new builds: the drawbacks
But if the sites fell out of vogue once, what will prevent them from doing so again? They might be all shiny and new, but should you really splash almost half a million on a 38-square-meter glorified cupboard? (Yes, even if it is stocked full of iPad-controlled appliances.)
The problem with new builds is that they can prove to be very popular in the short term, out-pricing period homes initially, but values don’t tend to age as well as for London’s beloved Victorian and Georgian houses.
Foreign buyers remain the main purchasers, scooping up in excess of 70% of prime London new builds
Research by professional property finder service Huntly Hooper suggests that period homes in prime central London appreciate four times faster than new builds. In the five years to 2012, Huntly Hooper found that new build homes gave a return of 10.7%, compared to 42.7% for traditional housing. All the 10 major modern sites in prime London underperformed the market by at least 20%, while four sites fell in value.
“New builds often do not amount to more than just this season’s fashion item,” says Simon Taylor Foster, co-founder of elite property group Link Property London, which specialises in high-end London sales.
“It’s a rare developer who achieves a classic design that endures in the way that period buildings do. There are quite a few boxes you need to tick before buying a new build.”
Edoardo Mapelli Mozzi, managing director at Banda Property also urges caution. “In general our advice to clients is to tread carefully. We are not against buying or investing in new builds – there have been some real success stories in London – but these tend to be the smaller bespoke projects.
“Looking back over the years, it is the period properties in prime areas of London that have appreciated the most when the market booms. They are also more resilient in a downturn. When the market drops, the new build developments take a bigger hit due to the fact that there is a high density of similar flats all in the same area.”
This means staying away from larger developments, says Mapelli Mozzi, where rents might fall quickly due to oversupply if a property bubble forms.
Can you outperform the curse?
If the risks are so high, why are we still building and buying luxury new builds in London?
A large part of it is that the new build market has started to evolve.
It is no longer just dominated by large scale developments, like the headline-catching Heron.
Developers Taylor Wimpey Central London attributes the flutter of new build activity to Londoners (domestic and foreign) wanting more “connectivity, convenience and a more stylish lifestyle.” As opposed to five years ago, this is now being catered for by a rise in “smaller, more bespoke developments which are popping up, and moving new build away from the one size fits all category and consequently making them aesthetically more attractive,” says Trish Henderson, sales and marketing Director at Taylor Wimpey Central London.
Foreign buyers remain the main purchasers, scooping up in excess of 70% of prime London new builds, preferring the ease and efficacy of a new home.
They are often unimpressed by our crumbling Victorian darlings, and prefer light modern design, with lots of storage spa
ce. They certainly don’t want to get caught out by problems like dry rot or boiler problems and are happy to watch their property appreciate less slowly as they are either cashing in on rents or happy to jeopardise the price mark-up for the convenience of a 10-year guarantee that usually comes with new builds.
Additionally, these properties are seen as safe and can be bought through agents, without the buyer necessarily visiting the home, making the whole process much easier. And with growing numbers of affluent Chinese and Asian buyers looking to invest, this trend is likely to continue.
Sensing the foreign-fuelled shift to contemporary design, Brits have also started to get interested, even if they look more at the lower range of the luxury market to get a good investment.
“A significant quantity of buyers are of domestic origin and it is their ‘shift’ in preferences that is perhaps the most interesting,” says Adam Stackhouse, director and head of developments at Marsh & Parsons estate agents.
“These groups often comprise a combination of buy-to-let investors seeking ‘ready built’ property to act as a safe and tangible investment that provides immediate returns, and those who are moving down the market in terms of their London property assets as they either re-locate to commuter towns, or perhaps during retirement make greater use of a second home overseas.”
How to ensure your brand new London home won’t leave you broke
New builds remain problematic, but estate agents insist that you can mitigate exposure – provided you are smart with your investment and find a special selling point that will be coveted long after the new coat of paint chips or the glass loses its gleam.
The easiest way is to find a development which is popular with a specific foreign clientele. Carmel Gate in North London has mastered this trick well.
Developers Berkeley boasts that it has “spared no expense” in converting this development which has retained a splash of original features and draped them in OTT modern decadence. The mixture of flats, mews and large houses offers high security, off-street parking, concierge, video entry system and CCTV throughout. It also has heated floors, mood-controlled- and movement-sensitive lights. It’s certainly not for everyone, but the trick has worked.
Middle Eastern clients scooped up 20% of the development off-plan prior to its official launch this month, while Nigerian buyers have purchased several properties already this year.
Robert Soning, COO at luxury developers Londonewcastle says there are small tweaks that can make a property more attractive to a certain client type.
“Buyers from the Middle East prefer showers in bathrooms rather than baths, and buyers from both the Middle East and South East Asia prefer wooden or – better – tiled floors to carpets in bedrooms, where domestic buyers prefer the warmth of carpets underfoot,” he says. “And open-plan living has continued as a trend for almost all buyers.”
But while overseas purchasers may be the safest bet for now, there are many other ways to help your new build investment stand out.
Taylor Wimpey claims they try to build as many new homes (rather than apartments) as homes are harder to find and therefore easier to sell. Their Mulberry Mews in Highbury & Islington is part of a growing fleet of smaller housing developments stretching the city.
“The townhouses here – starting from £2.5m – are of specific interest as they offer families in the area so much more than the traditional local Victorian and Georgian terrace houses,” says Taylor Wimpey’s Henderson.
“These terraces are often listed and can be extremely difficult to renovate and expensive to run – meaning it is often more difficult to build comfortable, convenient open-plan spaces. More maintenance and upkeep is generally required and energy bills can be more expensive.”
The site is also developing a boutique office space, hoping to entice working parents to relocate their current workspaces closer to home – mumpreneur galore.
As Henderson explains, it is still also all about location, location, location. If you choose something with excellent schooling opportunities or transport links, your investment is more likely to be safe.
The other thing to look into is the range of new builds springing up further afield. “Contrary to overseas tastes, domestic buyer types are particularly interested in targeting ‘fringe’ areas such as Shepherd’s Bush and Battersea that have yet to evolve to the price points of their adjacent postcodes,” says Marsh & Parson’s Stackhouse.
“Put simply, British buyers are using their knowledge of the capital to try and out-perform the market by predicting where price growth will be at its highest.”
Making your London new build investment plan foolproof
Trying to be smart can only get you so far. If you really want to take on the convenience of a new build with significantly risk, there is only one way to go. Full on unabashed conversions. Period on the outside, with tech-savvy iron-clad contemporary credentials on the inside.
And if you have money to spend, there are various prime pickings on offer.
Hyde Park Square, a new development of 36 luxury apartments, is almost completely sold. Since starting refurbishments, only the £6.5m penthouse and a three-bed remain unsold.
The gem in the London property conversion scene, however, is undoubtedly Trafalgar One, the only residential address on Trafalgar Square.
The building has it all. It screams of London heritage, of ancient splendours and more refined times, but lets you lord your superiority over other period homes from the comfort of your CCTV-kitted-out apartment, which you reach through a direct lift. Professional lighting designs, automated blind control, wireless data distribution and the latest in acoustic technology, plus underground parking and 24 hour porter, also come as standard.
Developers BMB and LBS Properties, the masterminds behind some of London’s most famous conversions such as Eaton Square and Eaton Terrace, already say this is their most
“exciting development to date.”
“At Trafalgar One we are creating the ideal pied-a-terres for the ultimate urbanites, people who want to live and breathe the optimum cultural experiences that London can offer,” says Julian Mercer, director of BMB.
Not even the £5.95m price tag for a four bedroom apartment has put buyers off this hybrid bad boy.
So as adventurous as Londoners may pretend to be – even in their multicultural foreign-dominated investment ways – we still prefer keeping our conservative façade up. Just don’t tell anyone you’re hiding a jazzed up 21st-century computer lair to riv
al the Death Star underneath.
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