12th March 2007
Evening Standard – Just look who is cashing in on the boom, boom, boom
Noon in Knightsbridge. Jimmy Choo – clad Russians click-clack into Harrods coffee bar to swap telephone numbers with estate agents and make telephone – number bids for local five –bedroom homes. Nick Candy of development manager, Candy & Candy, pulls up at his office opposite the department store and greets a Qatari businessman looking to drop £25 million on a 12,000sq ft apartment at One Hyde Park, the most expensive new property development in London.
A few blocks away, Nicola Horlick, of Bramdean Fund Management, studies the latest London property investments. Around the corner, entrepreneur Grant Bovey cuts a re-development deal with Chelsea captain, John Terry, and the unlikely pair head out to celebrate at modern Japanese Zuma restaurant, where they are joined by Knightsbridge’s leading property finder; Johnny Bergius.
Russians buying houses over coffee? Apartments that cost more than country houses? Footballers and entrepreneurs becoming property multi-millionaires? Well, welcome to boom-boom London.
As the amount of ‘green’ land available for development falls, developers all over the capital are buying up unusual ‘brownfield’ sites, such as pubs, petrol stations, timber yards, railway sidings, lock-up garages, electricity sub-stations – even funeral parlours, and converting them into new homes.
What is happening in Knightsbridge is happening all over London. Motoring organisations say that one filling station a week is disappearing as the developers move in. Most highly – prized are small petrol stations or neighbourhood garages in upscale areas. Berkley Homes recently created townhouses with new Georgian facades on the site of an Esso fuel station in Notting Hill.
It’s the same story with garages. The residents of Harlequin Court in Covent Garden may not tell their friends, but they are living in what were, until recently, six underground car parking spaces, converted by developer Artesia into £600,000 apartments, described – with no irony intended – as ‘loft-style’.
Five pubs a week are now shutting their doors in the capital, according to the Campaign for Real Ale. London lost some 230 pubs last year – a 53 per cent increase in the rate since the year before. In Chelsea alone, 10 pubs shut last year, including George Best’s old local the Phene Arms.
New figures obtained by the Evening Standard from the Greater London Authority reveal a massive increase in the number of fresh applications for planning permission for new homes on existing non-residential sites. More than 130,000 applications were lodged last year and conversion work has already begun on 85,000 sites. The figures for the previous year were 90,000 and 40,000.
Robert Sonning of developers Londonewcastle, which specialises in converting ‘brownfield’ sites into new homes, says: ‘Every unprotected spot in town – and some that are protected – is now a potential home. We’ve come across everything from Jim Henson’s old Muppets studio in Camden Town to carpet shops in West London. They’re all being bought up and converted by niche developers searching for new niches.’
The boom has attracted an unusual mix of high-profile buyers and sellers. The Duke of Westminster, London’s wealthiest property owner, has sold off sites to new developers and buyers, among them most of the Chelsea squad, who have invested more than £100 million on flats in west London, making the area the top of the property league among Premiership soccer stars. Most are new-build flats in new properties built on converted sites.
John Terry, Frank Lampard and Joe Cole – joined by Manchester United defender Rio Ferdinand, Portsmouth’s Sol Campbell and Craig Bellamy of Liverpool – have each bought 20 flats at an average price of £400,000 to £500,000. They are among more than 100 Premiership clients of Jonathan Power, a property developer who specialises in acquiring homes for sports stars.
Grant Bovey, an entrepreneur perhaps better known as the husband of TV personality Anthea Turner, runs Imagine Homes which specialises in buying up existing sites and turning them into new accommodation. The firm controls 400 properties in London.
The buy-up frenzy is at its height in existing upscale areas where prices are highest or emerging areas where prices are rising and there is a greater supply of sites. The hottest markets are Knightsbridge, Chelsea, West Hampstead, Bow and Whitechapel.
Every spare square inch of Knightsbridge – from the giant hole in the ground that was once the unloved 1950s Bowater House and will soon be Candy & Candy’s One Hyde Park development, to the former Jet garage off Old Brompton Road, which is now two three-bedroom town houses – is being snapped up by developers anxious to cash in on the sharpest rises in property prices anywhere in London.
House values in SW1 have risen by almost 50 per cent in the past three years, according to Johnny Bergius, who has lived in the area for 20 years and runs property finder, Griffiths Bergius. ‘Prestigious, well-hyped developments, like One Hyde Park and No 1 Knightsbridge, have focused international attention in particular here and prices have risen for even the smallest spaces.’
Peter Harris, director of development with Notting Hill London, a wholly-owned subsidiary of Notting Hill Housing Association, has just brought a small postal depot just behind Whitechapel Art Gallery and is converting it into flats. He says: ‘We got in before the decision that London would host the Olympics and now we are looking to reap the awards, ‘ he says. ‘Bow and Whitechapel, being so close to the City, are on the rise.’
It’s not hard to explain the boom. Land for developments is in short supply. ‘There were 30 people bidding against us for one plot recently,’ says John Hiddle, director of Modern City Loving, a specialist London residential developer. ‘That kind of competition is unheard of…’
The price of brownfield land is around £250 a square foot – way below the price of ready-built developments. For a developer, securing a brownfield site and then getting planning permission to build homes on it that may sell for millions is very good business.
Sonning says margins can be one third higher than conventional property investments. Small niche developments are also attractive because, unlike larger developments, there is no need to incorporate social housing into the mix. Redevelopment grants are also available from GLA and central government who want to see at least 100,000 new homes a year built in the South-East.
But there are risks. Planning permission is not guaranteed. Interest payments on borrowed money are hefty. Building costs are notoriously unpredictable. Costs can escalate and the overall market can dip. ‘It is a risk game. It’s really, really tough. Its never straightforward.’ Says Sonning.
But that has not deterred entrepreneurs of every size and even the social housing sector. Harris’s Notting Hill London specialises in turning odd sites into affordable homes. ‘We manage 25,000 homes in London worth £2 billion, which means we can easily borrow money for our developments that always have homes costing around £200,000.’ He says. ‘It’s crucial that we build more affordable homes. London needs 25,000 affordable homes each year and currently only 7,000 a year are being built.’
Of course, not everyone agrees that the great London land grab is great at all or that it is making it easy to get on the property ladder. Back in Knightsbridge, Australian nanny, Lynda Vicks, 25, blames the frenzy for pushing prices so high that she cannot even afford to share a one-bedroom flat within a few Tube stop of her employers. ‘Working in London is killing me,’ she says.
Kevin Moran, landlord of The Nag’s Head, is the last independent publican in Knightsbridge. You’d think he’d welcome the demise of the competition but he says the loss of historic watering holes is damaging the character of the area and the pub trade overall.
‘The big breweries know the value of the properties and many of them have decided that it is more profitable to use them for housing than as a pub,’ he says. ‘Trade is down. Some of the new residents here don’t drink at all. Muslims are teetotal and the Russians go to the expensive hotel bars. If other parts of our heritage, like castles, were wantonly closed there would be an uproar but pubs are easy game. You don’t need planning permission to turn a pub into a restaurant or to demolish it.’
And, for every one of those who feel they are losing out in the buy-up boom, there is another one who predicts that the bubble is about to burst. But, for most in the newly-minted Kingdom of Knightsbridge – and all the other buy-up kingdoms – such concerns are, for now, small beer.
As Johnny Bergius puts it: ‘London is the centre of the world. All roads lead here for the wealthy elite, as well as those who want their first job. The pressure on land and the need for housing can only rise. A postage-stamp-sized puddle has value these days.’