Alchemi boss: Why the regeneration of Nine Elms adds up

The tabloids may have painted a picture of panicked buyers offloading units and walking away from their deposits, but the reality in Nine Elms is quite different, says Charlie Baxter

For the past three years the Central London residential market has been buoyant for properties priced below £2m but there are signs of a slowdown across the board.

A combination of rises in Stamp Duty in October 2014, and again in November 2015, and economic uncertainty created by Brexit has caused the Central London market to stall with sales down by more than 50% and a significant decrease of 36% in the number of planning applications for new developments.

There has been a historic shortage of new stock in London, characterised by continued failure to build anywhere close to the 50,000 per annum new home target, although last year recorded the best result to date with  28,000 new homes.

The continued new home shortage in London has also not been helped by additional taxes and burdens being imposed by local councils, keen to ensure private sector developers contribute more to resolve the shortage of affordable homes.

Adding all of this up, it’s hard to see how the chronic under supply of London homes will be resolved in the short to medium term. Conversely demand grows ever stronger with the capital’s population continuing to boom (6.8m in 1981 to 8.7m in 2016) so prices will inevitably continue to rise, especially as London’s strong brand continues to flourish internationally. As is often the way with strong brands, the more unattainable, the more appealing they become.

Alchemi’s Belmont scheme in Nine Elms

The massive regeneration of Vauxhall and Nine Elms is definitely a bright spot for central London residential and will help to ease the supply issue. The statistics are impressive with more than 20,000 homes and two million square feet of office space being created.

Ten years ago, Lambeth earmarked Vauxhall an area suitable for tall buildings, nine years ago the US Embassy decided to re-locate to Nine Ems and five years ago saw the sale of Battersea Power Station to Malaysian backers, who started development right away. Seven years ago saw the topping out of Vauxhall’s first tall building “The Tower”, six years ago saw consent and funding of the new Northern line extension and five years ago saw Ballymore’s successful launch of Embassy Gardens. For the past five years development momentum has gathered leading to a sea of cranes, mud and hoardings!

Finally a tipping point has been reached in Vauxhall and Nine Elms. One year ago saw the opening of Waitrose and Sainsbury’s, completion of Vauxhall’s second tower “Vauxhall Sky Gardens”, Apple signing a 500,000 square foot office lease and then this Summer’s launch of Battersea Power Station’s Phase One, including new restaurants. Later this year we will also finally witness the opening of new US Embassy.

Despite the tabloids printing numerous stories of panicked purchasers offloading off plan flat purchases onto the resale market for losses and walking away from 10% deposits, the reality is quite different. No one has walked away from their purchases because it’s obvious that an area selling brand new homes four tube stops from Oxford Circus at an average of £1,500 per square foot represents great value. Especially, with Chelsea Barracks flats less than a mile away selling for an average of £4,000 per square foot.

No one has walked away from their purchases because it’s obvious that an area selling brand new homes four tube stops from Oxford Circus at an average of £1,500 per square foot represents great value

Of the 20,000 home total, there are only circa 6,500 homes currently in pipeline for sale, whilst more than 1,100 apartments have been sold in the past year alone and others have been bulk sold to Private Rental Sector operations. Sales rates are strong and, far from an oversupply, the area is on target to soak up the current supply by the time the Northern Line extension is completed, and Apple move into their new offices in 2021. We also have to consider that the area is set to generate 25,000 jobs, so Apple is just part of the story.

Sites in the area are being snapped up too. This year alone there have been four major development site sales in Vauxhall and Nine Ems totalling £800m in purchase value. Further evidence, if needed, that developers recognise the massive potential offered by Vauxhall and Nine Elms too and that the regeneration is now well and heading down the home straight.

Without question – Central London’s greatest success story!

Charlie Baxter is Managing Director and Co-founder of Alchemi Group

Images: DBOX for Alchemi

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