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city SHOWHOUSE with Ed Hammond

The streets of London, as anyone who has been there will testify, are not paved with gold, either literally or metaphorically. As well as being among the

filthiest in the country, sprawling outwards beyond the polished slabs of the City along miles of exhaust stained, chewing gum flecked carriageway, London’s streets offer no guarantee of prosperity. One only need watch the revolving door of the

high street to see that for each clothes shop, coffee bar or newsagent that sticks, there are a great many more which do not, sucked out instead on a tide of debt and dashed dreams. Housebuilders seem unfazed by this prospect, however. The industry has packed up its tool kit and marketing slides and is moving wholesale to the capital. Where once management filled investor days talking about their “national presence” and their ability to “meet the needs of each of the many regional markets” they played in, now it is all about London. The stalwarts of the sector, the so-called national housebuilders, are all talking up their activities in the capital so much that it sounds like they are reading straight from a Berkeley Group press release. The London market is the place to be seen. Last month Barratt fired the starting gun on

its project to build a new 375-unit development next to the Emirates Stadium in north west London, home of Arsenal Football Club. The scheme is a typical inner-city housing development – four blocks of upmarket apartments, topped off by expensive penthouses. Slightly more surprising is that for Barratt, that powerhouse of national housebuilding, this project, far from being edge of the empire stuff, is now centre ground.

marketing of the residential scheme. Bellway, too, is trying its hand in the capital


The group has amassed a 7,000-unit land bank in the capital and is working on a host of buildings, including a 550-unit scheme in Dalston Junction and a 27-storey residential tower on those polished City slabs. Far from satisfied, Barratt is on the hunt for more land and only just pulled out of the £1 billion race to redevelop the New Covent Garden site in Vauxhall, citing issues with the landowner having too much control over the pace and the

and, among other things, is in the process of turning an old cinema in the expensive Fulham area into a block of flats. Even Steve Morgan, the hearty Liverpudlian,

is bringing his brand of carefully styled homes inside the economic force field of the M25, or, as he put it to be earlier this year, “putting my tanks on Tony’s lawn”. What Tony Pidgley of Berkeley makes of all

this remains unclear. It is fair to assume that he will not be overly concerned by the arrival of new entrants into the market he has long considered his personal stomping ground. He cannot be surprised, however. The logic for coming to the capital is simple. Demand for homes in London is always, to a lesser or greater extent, decoupled from that in the rest of the country. Prices, and therefore the margins housebuilders can achieve for their developments, have reflected this. Under the strains of the economic slump this imbalance has been hugely magnified. House prices in London are at, or near, pre- recession levels, while demand is so buoyant that many developments are sold up before the foundations have been dug. This kind of hyper sellers market compares ridiculously favourably to other parts of the country. Take the North East, for example, where price falls can still be measured in double digit percentages and developments lie unoccupied, the flags of their builders flapping forlornly amid long-ago finished homes, and the move down south makes sense. As well as the natural demand from workers coming in from other parts of the UK, the money washing into London from overseas is providing a healthy injection of liquidity to the capital’s property market. Cash-rich investors from across the world are snapping up apartments all over town to use as investment properties, holiday pads and places to house children studying in London. The demand for London homes in parts of Asia, such as Singapore and Hong Kong, is so strong that housebuilders will often sell half of a development, off-plan, in one round of sales junkets. Other buyers, from the Middle East, North Africa and the European countries of Greece, Italy and Portugal, are sticking their money into the capital’s bricks and mortar as a safe investment far away from the political and economic turbulence of their homelands. On paper the industry’s migration to London makes perfect sense. The margins are higher and turnover quicker. The appetite for new homes of all shapes and sizes is seemingly insatiable, while opportunities in other parts of the UK are thin on the ground. The problem is that when something seems

too good to be true, it usually is. London’s stock may keep rising. The giant metropolis may never stop growing and new homes to feed it may always be in demand. Its streets, though, will never be paved with gold. Housebuilders would be rather wise to remember that. Ed Hammond is construction reporter for the Financial Times

sh showhouse July 2011 | 23

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