Northacre says investors are in for the long haul on luxury London property
Amid political upheaval in the United Kingdom, the luxury property developer Northacre remains bullish on its outlook for the year as investors take a long-term approach to the high-end market in London.
After a difficult 2016 dominated by the Brexit vote, triggering a dramatic drop in property prices and the volume of transactions, 2017 is forecast to be much better for the firm, majority-owned by Abu Dhabi Financial Group (ADFG).
In the first three months of this year, according to JLL, prime London property prices posted their first quarter-on-quarter rise since the third quarter of 2014, when oil prices began to fall from their summer peaks of about US$110 per barrel.
“In general, prices stopped rising in the middle of 2014 after 20 years of continual growth. Despite Brexit, and stamp duty increases, many international buyers have used this as an opportunity to continue to purchase property in London. In light of this, we will not be changing our forecasts,” said Niccolò Barattieri di San Pietro, Northacre’s chief executive.
The London developer’s residential project No 1 Palace Street, opposite Buckingham Palace – bought by ADFG for Â£310 million (Dh1.46 billion) in 2013 – is scheduled to be completed in 2019, by which time the UK is expected to have finalised the terms of its exit from the European Union.
While many observers expect markets including Paris, Frankfurt and New York to benefit from the UK’s period of uncertainty, Mr Barattieri believes London will remain the top draw for property investors.
“We strongly believe that London will continue to hold its dominant and stable position as the No 1 city for investors. Other European cities will still struggle to compete due to London’s strong investment opportunities and its unrivalled international connectivity,” said Mr Barattieri.
Financial institutions have started to move staff to other financial centres, such as Frankfurt, Dublin and Luxembourg, in anticipation of Brexit but Mr Barattieri does not expect this to affect the luxury end-user market in London.
“The type of employees that are moving to other financial industries are not our target market. They don’t generally buy super high-end apartments, especially within the types of departments that are being moved. As a result, this hasn’t affected Northacre,” he said.
Agent Savills is marketing the 72 units at the 300,000 square feet No 1 Palace Street, which are reportedly being priced at up to Â£30m each.
Last year, Northacre reported a 7 per cent rise in revenue to Â£4.5m but made a pre-tax loss of Â£1.6m on a drop in development fee income as a result of the completion of its Vicarage Gate projects. It was also unable to sell its own Â£6.55m development at 22 Prince Edwards Mansion.
Northacre is developing a Â£1 billion mixed-use project on the site of the former police HQ New Scotland Yard and plans to begin marketing it this summer, after the June 8 UK election. The political climate could work in its favour, according to Mr Barattieri.
“The current favourable climate for buyers from US dollar-dominated markets has obviously provided international buyers with an opportunity to seek investment and our clients are recognising this period of uncertainty as the ideal moment to show confidence in the UK housing market as a weather-able and dominant force,” he said.
However, overall house prices in London are predicted to fall in real terms across 2017 – marking the first time this has happened since 2011 – according to an index by Hometrack, the Press Association reported on Friday.
Hometrack’s latest report shows annual house price growth in London is already running at less than a third of the levels of a year ago.
In April, house prices there were increasing by 3.5 per cent annually – compared with a 13 per cent surge a year earlier.
London house prices are now rising at their lowest rate in five years, Hometrack said.
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