Battersea Power Station has long been one of the UK capital’s most iconic landmarks, but the same cannot be said of its location.
Unlike posh spots such as Knightsbridge and Belgravia, where some homes change hands for £10 million ($12.5 million) or more, there is less of a market for super-luxury property in this part of town.
Battersea is “south of the river,” a side of London to which, as the old joke goes, even taxi drivers are reluctant to venture.
However, this is changing with a £9 billion redevelopment that will see London’s old power station, with its distinctive four chimneys, transformed into luxury apartments and several swish new blocks built around it.
Moneyed Middle Eastern property investors — notably those from the Gulf — are showing increasing interest in such schemes, away from the “golden postcodes” of London that have historically attracted their attention, developers and agents say.
However, this comes amid much uncertainty in the London real estate market given recent tax changes, global economic uncertainty, falling property prices, and fears over the UK’s exit from the EU.
Foreign buyers eye UK property
There has been an “uptick” in inquiries from foreign property buyers in the wake of the Brexit referendum in June, the developer of the Battersea Power Station said. The vote was followed by a devaluation in the pound against the dollar of more than 15 percent, meaning Gulf property investors get more bang for their buck when buying in the UK.
Andrew Jones, director of special projects at the Battersea Power Station Development Company, is a regular traveler to Saudi Arabia and the wider Middle East, where he sees keen interest in the development among investors. “The Kuwaitis and the Saudis have been buying here since the 1960s and 1970s, and there is a real love of London,” he told Arab News.
“In the past it tended to be the ‘golden postcodes’ that attracted (Gulf investors’ attention), but now more and more people are seeing the benefits of what we are doing.”
The Battersea Power Station development has attracted property buyers from Saudi Arabia, Dubai, Abu Dhabi, Qatar, Kuwait, Lebanon and Jordan, the executive said.
“Post-Brexit, we have seen an uptick in interest from overseas generally. People (who live in countries with) dollar-pegged currencies see the additional value,” said Jones.
“The continued weakness of the pound (and) increase in the oil price is probably going to help as well.
“People recognize what London has to offer in terms of ease of access, the very good relationships that the UK has throughout the GCC (Gulf Cooperation Council), and those historic links.”
Apple’s new core
The redevelopment of the old coal-fired Battersea Power Station has been decades in the making.
It stopped producing electricity in 1983, but as several proposals to transform the listed building came to nothing, it lay unoccupied for decades. That is changing, with construction works now in full swing, as Arab News found on a tour of the site earlier this month.
Cranes still tower above the open shell of the main power station building, which was built in two halves in the 1930s and 1950s.
However, a glass-clad new building next door — part of the wider development — is nearly complete.
Rob Tincknell, chief executive of the Battersea Power Station Development Company, said the iconic building is a reminder of a more industrial age.
Its four chimneys have been used frequently in pop culture, notably as the cover to the Pink Floyd album “Animals.”
The mixed-used site spans 42 acres, which will eventually be home to some 4,364 new homes — some of them designed by acclaimed architect Frank Gehry — along with two hotels and over 3 million square feet of commercial space, including offices and retail units.
The project, by the banks of the River Thames, is within the wider Battersea and Nine Elms redevelopment area, which will be home to some 20,000 homes as well as London’s new US embassy building.
In a major coup for the Battersea Power Station developers, technology giant Apple said in September that it would move its London headquarters to the building. Apple will become the largest office tenant when it moves 1,400 staff to a six-floor office space in the old central boiler house.
“Apple will have a dramatic impact,” said Tincknell. “I am sure that lots of other tech companies are going to want to be as close to that as possible.”
An extension of the London Underground’s Northern Line is currently under construction to serve the site, with the transport link set to open in 2020. Plans include an events space and viewing elevator that will rise up one of the historic chimneys.
Apartment sales, tax woes
Homes in the development went on sale in 2013, with prices in the first phase standing at £343,000 ($428,321) for a studio apartment and around £6 million ($7.5 million) for each of the nine penthouses.
Construction began that year, and the first residents — who bought units in a block next to the power station itself — are set to move in next month. The actual power station building is set to reopen in 2020, while all eight phases of the wider development are due for completion in 2026.
Homes currently being marketed include two-bedroom apartments priced from £1.33 million ($1.7 million) and three-bed properties at £1.9 million ($2.4 million).
About 1,500 units had been sold as of early December, with more residential phases set to be launched later. Tincknell said plans might be rebalanced, however, to include more office space and fewer residential units, depending on the market. “In the last 12 months we have sold about £120 million ($150 million) worth of apartments, which is about 60 units.
“We are beating the market in the whole of central London... People are still wanting to invest here.”
But buying here is hardly a no-brainer for Gulf investors. The power station developer in March moved to deny claims that foreign investors were “scrambling” to sell properties in the scheme at discount prices.
And the scale of the redevelopment in the wider Battersea and Nine Elms area has prompted some fears of an oversupply in properties. Further uncertainty comes with the falling real estate prices in the UK capital. Agent Savills expects prices for prime central London properties to drop by 9 percent this year and stay flat next year and in 2018.
Tincknell acknowledged the upheaval in the wider London real estate market, which he said had been caused by the Brexit vote and changes to property tax, known as stamp duty.
“The market has changed. Brexit and stamp duty have had a serious impact on the residential market in central London,” he said.
In April, the UK government increased the rate of stamp duty for those buying second homes, and introduced a capital-gains tax for overseas property investors, requiring them to pay a percentage of the increase in a property’s value when they sell it. Previous changes saw an increase in the rate of tax on the most expensive UK homes — those worth more than £937,000 ($1.2 million) — a price range in which many London homes fall.
All this means someone buying a second home in the UK valued at more than £1.5 million ($1.9 million) will be obliged to pay 15 percent of the property value as tax, a rate Tincknell said was high.
The new tax regime is also pushing some foreign investors to invest outside the super-prime areas of London, Tincknell said, in what would exacerbate the trend in those looking outside the “golden postcodes.”
“It is increasing house prices in other parts of London, because foreign investors are now out into the outside zones,” he said.
“Transaction taxes are very high, and that has slowed up the market considerably, particularly the UK buyer, who is just literally staying put at the moment.
“Counter to that, we have exchange rate (moves). The pound is very low at the moment, so that stamp duty increase can be absorbed by significantly better exchange rates. That is why most of the buyers in the market at the moment are foreign investors.”
‘Golden postcodes’
A developer building in SW8 — the postcode covering Battersea — would obviously be keen on trumpeting its popularity over traditional Gulf investment hotspots such as SW1, which covers Knightsbridge and Belgravia, and SW3 (Chelsea).
However, other property experts confirmed that investors from the region are looking beyond the traditional prime property areas.
“We have seen a trend of Gulf investors as well as other savvy investors looking outside the ‘golden postcodes’ to buy property,” Victoria Garrett, Knight Frank’s head of international project marketing in the Middle East and North Africa, told Arab News. “In response to this, we are seeing more super-prime developments being built outside of these areas.”
Garrett said there are two key reasons for this trend: The high prices in prime areas like Mayfair, and Gulf investors becoming more adventurous. “With prices breaking the £7,000 ($8,741) per square foot mark in Mayfair, we have seen Gulf buyers looking south of the river at areas such as Vauxhall and Battersea, where you’re looking for new builds in some developments starting at just below £1,000 ($1,249) per square foot,” she said.
“With continued unrest in parts of the Middle East teamed with the currency (moves), London is seen as a safe haven.”
Who knows, as wealthy Gulf investors venture to new parts of London, maybe even taxi drivers will find “south of the river” more appealing too.

Source: Arab News