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Is Battersea Power Station a good investment?

Saturday 5th January 2013

Having waited for a long time for the opportunity to acquire a new home at the much anticipated Battersea Power Station regeneration scheme, homebuyers are finally being offered the chance to buy property off-plan.

The Battersea Power Station Development Company kick-started the UK sales programme last week, and purchasers have not hesitated, with around 600 residential units at Battersea Power Station reserved in less than one week, according to Battersea Power Station Development Company (BPSDC), the company behind the iconic scheme.

Rob Tincknell, Chief Executive Officer of BPSDC, said: “The first week of sales at Battersea Power Station has been phenomenal with commitments for over £600 million received since the launch just five days ago. This is a water shed moment in the history of the Power Station and key to finally enabling this important London site to be regenerated, more than thirty years since its decommissioning.

“Buyers, both in the UK and abroad, clearly appreciate the mixed-use nature of the town centre scheme which will provide London with a thriving new community on the banks of the River Thames.”

Foreign sales

Sales exhibitions of Phase One now continue in other international markets in response to the widespread pre-launch registered interest shown in the development, with Jones Lang LaSalle having been appointed as international sales agent for this iconic scheme.

Following its successful launch in London, the first phase of Circus West is being launched in Singapore and Hong Kong later this month.

Tincknell added: “Jones Lang LaSalle has been appointed in Hong Kong and Singapore to handle international sales. We are going to the best people for the best markets and are confident that Jones Lang LaSalle will do a tremendous job for us.”

Prices

Stage one of the regeneration scheme features a mix of 800 one-, two- and three-bedroom apartments, townhouses and penthouses. Prices start from £338,000 for a studio, from £423,000 for a one-bedroom, from £613,000 for a two-bedroom and £894,000 for a three-bedroom apartment with first occupancy expected to be in 2016.

However, buyers seeking to secure a unit in the development only have to pay £2,500 now as a reservation fee. But is the development such a sound investment?

Good investment?

Despite the early sales success at Battersea Power Station, some property experts question whether the prices being charged at the scheme are too high.

Property finder, Sourcing Property, is warning its clients to be cautious of investment in the Battersea development, because it is concerned that the “hype” surrounding the project has led to overinflated values.

Jo Eccles of Sourcing Property advises homebuyers to conduct all necessary due diligence before committing to purchasing a property in the project. 

“After years of sitting derelict, it is fantastic to see that London icon, Battersea Power Station, is finally about to be restored. However, we are warning clients to be extremely cautious not to get swept up in the hype with the huge amount of development in the Battersea and Nine Elms area,” she said.

Although it was reported that Londoners were given the first chance to buy one of the initial 800 properties launched, with most developments in central London, Eccles pointed out that the first phases are usually sold off-plan in Asia to Asian buyers who snap up properties at questionably high prices, setting an inflated benchmark.

Eccles continued: “Looking at a lot of the 'prices per square foot' being paid in a number of these developments, for example St George's The Tower in next door Vauxhall, in our opinion the prices just don't stack up.

“Whilst the plans for Battersea Power Station look exciting, with investment in infrastructure and the creation of hotels, restaurants, shops, a theatre and cinema, my concern is whether they will be able to create a genuine community from scratch where such commercial outlets can really thrive and survive. Many other riverside developments which have been equally isolated from existing communities have failed so far and we will wait to see if Nine Elms can really achieve what others haven't. We've seen this in other large scale riverside developments such as Battersea Reach where the site is quite isolated and has never been able to create a genuine community. A lot of those properties were bought by overseas investors and as a result, a large number of the flats there are either empty or occupied by tenants who inevitably move on fairly frequently and don't have the same interest in the building as someone who actually owns their flat.

“Some of the developments being built in Nine Elms are vast in size, such as Embassy Gardens which comprises nearly 2,000 new homes. This is just one development in the area, alongside Battersea Power Station and others. The risk is that there will be a huge oversupply of flats, especially those for rent which have been bought by overseas buyers. As such, from an investment perspective, we're warning clients about oversupply of property and the risk of no real community.”

Ghost town?

Despite fears of a lack of coherent community, too high an investor/owner occupier ratio and Far Eastern over exuberant buying, he does not believe that Battersea will go the way of some other major “soulless” developments and partial ghost towns, “like Chelsea Creek, Battersea Riverside – or even Milton Keynes”, Nicholas Spencer of Henry & James disagrees with Jo Eccles’ views on the Batter Power Station development.

He commented: “Battersea is an established area, is an iconic structure, linked romantically to doomed redevelopment schemes and it's visible from everywhere; it's hardly Brentford Lock.

It sits prettily on the western edge of the Nine Elms redevelopment, with the US Embassy opening in 2017, with Battersea Park – which drew the Duke of Cambridge for a game of late night footie on the eve of his wedding; unlike Battersea Reach, across the bridge from the cement works.

“It's being developed long after the stigma of being south of the river has faded, it lies in Wandsworth, of the low low council tax & high high schooling results

“Jo Eccles is quite right; investors looking to buy cheap, rent high & sell on the crest of a double digit wave will be disappointed, but investors looking to buy a piece of the most exciting and largest development in central London, hold it and look to the long term, as the Far Eastern buyers often do, will be happy they had the foresight to buy & the gumption to hold, while Generation Rent can only wring their hands and think what might have been.”

              

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