The increasing property chatter about a stalling London property market particularly in investor fed Nine Elms & Battersea area is going to have repercussions outside of the City as we step through this year. We are hearing whispers from brokers, developers & estate agents that the new luxury apartments planned & now being built particularly in the area south of the Thames towards Battersea Power Station are starting to struggle finding buyers. With much of the stock there sold off plan one or more years ago to largely overseas buyers , particularly the Far East, there is real concern now being expressed as some of these buyers who were looking to sell on as they approach completion wont be able to or indeed will fail to complete their purchases.
With nearly 20,000 homes being built or planned in that one area the current combination of the weaker domestic London market alongside the slowdown in the economy of China , the pressure of the Rouble for Russian buyers & the depreciation of the Malaysian ringgit against the pound in what is a secondary London residential location will have an impact. The current statistics record that prices in London SW8 fell 8% last year & that nearly a third of the stock there has been on the market already for one year .Possible discounts of 20-30% on new homes might now be possible there for keen buyers.
An experienced London developer told us that the largely unplanned regeneration in that one area involving so many different schemes has brought just too much stock to the market at the same time and at prices which ultimately weren’t sustainable. For me it restates again that the key for successful property investing is Location Location and Location. Markets rise & fall, and during rising markets as we are now witnessing in Derby new properties can get built on areas which in previous times might not have been sustainable when the land sat empty or derelict. Sometimes these fringe locations can very quickly become absorbed into the area they sit on the border of or perhaps like parts of SW8 they sit in a mass of new housing that just takes time to become absorbed.
Derby doesn’t have the wall of money that regenerates areas at the speed which you sometimes see in some parts of London. Locations suddenly becoming trendy and seemingly overnight popping up new bars, art galleries with the area catching the vibrancy of urban excitement. Because of this it is important for potential owner occupiers & investors alike that they look properly at every new development they are considering because they too could get caught and isolated if the market here in Derby slowed down.
Going forward as a direct result of this London imbalance we might find development finance backing for these outer locations becoming more difficult if London based funders sense caution in all UK City Centres More immediately I now see over promises in the likely levels of rental return being advertised by certain developers who have schemes coming forward in these hinterland locations of the Derby City Centre. If the steady pace of regeneration slows I sense potential tenants at these higher rentals now suggested to landlords in these particular blocks will easily be tempted into more centrally located properties at those same prices. These outer locations might then see a consequent price adjustment plus possible larger void periods between tenancies.
For investors this means that they need to now open their eyes and look to buy l close to where their tenants want to be not only today but going forward in the immediate years to come. Derby City Centre is moving forward but we recommend you don’t go too far.