LONDON — A fall in interest from international investors has left developers with a glut of mispriced luxury flats in South London, according to Bloomberg, pushing prices down as a result.
Bloomberg analysed new data from the Land Registry and found that London’s SE1, SE11, and SW8 postcodes all saw average house price sales drop in March. These postcodes include areas such as London Bridge, Waterloo, Elephant & Castle, and Kennington.
The biggest price decline came in SW8, home to areas such as Battersea and Nine Elms. These areas have completely transformed over the last 5 years, with billions spent on high-end developments.
A Malaysian consortium invested £8 billion in redeveloping the iconic Battersea Power Station into 3,500 homes, offices, shops, and a park back in 2012. Almost all of the flats in the development were sold to overseas investors before they were even built.
The anchor development, coupled with plans announced in 2014 for an extension of the Tube to the area, helped spark a luxury building boom in Battersea and Nine Elms. The Guardian reported in 2015 that £15 billion was being invested in revamping the area, largely going towards luxury tower blocks that the Evening Standard said would turn London into “Dubai-on-Thames.”
However, changes to stamp duty introduced last April and the uncertainty of Brexit have put off foreign investors who were once keen on London. Regular Londoners also can’t afford to keep up with increasing property values, forcing sellers to lower their asking prices.
Bloomberg quotes Neal Hudson, founder of research firm Residential Analysts, as saying: “Investors have dried up and the bulk of demand for London homes is now from owner-occupiers who can only afford to pay £450 per square meter.” Hudson told Bloomberg that flats in Nine Elms go for £750 to £1,000 per square meter.
The findings mean investors who bought property in the area hoping to make a profit and developers who have built the stock face a loss or smaller profit when selling.
While luxury flats in South London are suffering, prices in nearby areas like Brixton and Stockwell are jumping, Bloomberg found. Prices in SW9 jumped 6.9% in March, according to Land Registry data. The housing stock in this area is largely focused on the middle-market and is more affordable for Londoners.
Separate figures from Nationwide released on Thursday show slowing house price growth across the country. Average prices grew by just 2.1% in May, the slowest growth in four years, while prices declined by 0.2% on a month-on-month basis.
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