Sep 10 2013

One Hyde Park “worst investment in prime central London”

Posted by: Nick Shaxson in: Thoughts

Following my long article in Vanity Fair this year about One Hyde Park in London, the world’s most expensive residential apartment building and a fascinating micro view of tax haven activity in what I’d regard as the world’s most important offshore jurisdiction, I am fascinated to see this, from the Financial Times:

“A one-bedroom apartment in the Candy Brother’s (sic) flagship development is being marketed by estate agent Strutt & Parker for £5.25m after being appointed by the property’s receiver. It is believed to be one of the first repossessions at the infamous Knightsbridge development.”

And that isn’t all. The article and Spear’s magazine quote Tracy Kellett of BDI Homefinders, a buying agent, as describing One Hyde Park as the

“worst investment anyone could have made in prime central London. . . it’s rather sour-tasting Candy.”.

The Steeple Times has more. While prime central London properties have risen by some 50 percent since 2007, she said, One Hyde Park apartments have stayed flat, on a £ per square foot basis.

This isn’t the first stumble at the very very top of the UK housing market either: in May, we saw Lakshmi Mittal putting a mansion on the market for £110 million, £7 million less than he paid for it. Propertywire is carrying a recent story saying that while prices in prime central London are projected to keep rising this year, super-prime London (the One Hyde Parks of this world) are starting to look a little less frothy.

For those investors accustomed to prices only going up, these news reports, and perhaps a few others (though I haven’t been watching closely recently) may be unsettling, despite the best efforts of estate agents and other cheerleaders to keep the party going.

The UK’s (and particularly London’s) house prices have been held up for years by the top end of the market, significantly as a result of Britain’s offshore-heavy model of attracting rich people and buyers from around the world. They are lured by often tax-free treatment, secrecy, as well as by the likes of Eton College, Harrod’s, and a number of London’s and the UK’s more wholesome attractions. All that stuff — the good and the bad — is still very much in place.

Will the super-prime London market top out soon? I have no idea, but when it does,  then this could be a big deal for Britain: the canary in the coal mine. Given the number of false tops we’ve seen in the past, only a brave person would predict that any top has been reached, and One Hyde Park is a unique place with its own price dynamics. What is more, the UK government has been lighting  artificial and highly ill-advised fires under the lower-end property market, in the hope of stoking up some feelgood ahead of the next election. It’s an idiotic strategy, of course, but that’s politics for you.

Let’s see how this all shakes out in the coming months and years. My gut feeling is that this coalition will do everything it takes to keep UK property bubbling up until the next election – after which we are likely to see a big correction or crash. But if the top of the market does start to fall back sooner than that, and foreign property buyers stop flocking to London, then the pain could come earlier.

3 comments so far

David Quentin 9th September, 2013 6.18 pm

I suspect that any stagnation or fall in the value of this kind of property would be (at least in part) a result of recent changes in tax law which make holding this kind of property through an offshore SPV inefficient from a tax perspective. Previously that was the standard mechanism for international HNWs to buy high-value UK residential property.

Nick Shaxson 9th September, 2013 9.05 am

yes, though there were some estate agents saying the effect on prices and buying interest seems to have been smaller than they’d originally expected.

[…] matches some things I wrote in a blog in September, which quoted a buying agent as saying that One Hyde Park, the core subject of my […]

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