Mainstream media on Battersea Power Station’s financial and social unsustainability

Battersea Power Station, since the end of 2014, has been standing wounded with only three chimneys left, and we have not yet seen any sign that the Battersea Power Station Development Company is starting the rebuilding work on the SW chimney.

View from Battersea Park Station, taken by Spectacle on 23/02/2015

Battersea Power Station from Battersea Park Station. Image taken by Spectacle on 23/02/2015

Meanwhile, some of our worries about the social impact and the financial viability of the whole project have been shared by a number of different analysts.

For instance, our concerns about the financial viability of Big Bang Development grow stronger as main-stream financial newspapers, such as Bloomberg, have highlighted that after the positive performances of recent years, London’s house prices have now started going down.  Bloomberg states, in a recent article, that “prices in emerging prime London fell 2 percent in the final quarter of 2014, according to Douglas & Gordon” and that “the area, which includes the Nine Elms neighborhood, was the worst performer in “emerging prime” London last year, broker Douglas & Gordon Ltd. said”. “Overseas demand for prime London homes is cooling, and some upscale projects being marketed “have gone over to Asia and probably haven’t done as well as they would have” in early 2014” quoting Jack Simmons, head of U.K. residential development and investment at broker Cushman & Wakefield Inc.

This alarming report, suggesting that the degrading value of houses might scare investors and threaten the financial plan of big projects such as the one by Battersea Power Station Development Company, was corroborated in an article by The Telegraph. The Telegraph reports that properties in the Nine Elms area are already flipped, thrown on the market to make some gains, before even a single brick of the flats has been put in place. This circumstance seem to confirm our impressions, sharing with The Telegraph’s journalist the “concern that homes built in the early phase of the huge project, were mainly reserved by investors – who have waited for the market to pick up before “flipping” them – and overseas buyers”. Instead of sounding an alarm in the heads of Battersea Power Station Development Company, the same article tells us that a spokeswoman for the company said: “We launched phase one at Battersea Power Station over two years ago and we are pleased to see that the early pioneer purchasers, who helped to get this project off the ground have experienced good levels of growth”.

If fluctuations of the property market could turn investors away, the new strength of British Sterling on the foreign exchange market could cause even more troubles to South Asian Buyers. The Star, one of the most popular Malaysian news sites, published a page explaining how to deal with loans in foreign currencies to prevent investments, such as a flat in Battersea Power Station, turning disastrous by weaker local currencies.

Rahim & Co consultant, marketing (London properties), Guy Major says “It is ‘dangerous’ to have a mismatch between your ability to pay based in ringgit and a pound-denominated loan,” he says.

If our concerns about the finances of the project are aimed at putting question marks over the narrative used by big bang developers to sell their projects, other media apparently started sharing our worries about the social impact of this monster development. The Guardian came out recently with a long and quite critical article about Battersea Power Station, “the biggest building site in London, and one of the largest regeneration projects in Europe”. Significantly titling the article “Battersea is part of a huge building project – but not for Londoners”, the Guardian highlights the tendency of new developments in London to get higher – “Hong Kongification” as Tony Travers, director of the Greater London group at the London School of Economics, puts it.

The Guardian quotes Ravi Govindia, the Conservative leader of Wandsworth council  “Yes, some of the buildings will be tall, but there will be a distinctly London flavour. It’s going to be a place that people [will] enjoy living in.” Govindia says, adding that the project “will bring 25,000 permanent jobs plus 20,000 construction and engineering jobs during the building phase”), the article warns that building luxury flats for wealthy foreign buyers is exacerbating the housing problem for thousands of Londoners in need of homes.

On the other hand, Will Martindale, Labour MP candidate for Battersea, in a blog posted on The Huffington Post, shared his concerns (and some of his neighbor’s) about the way Battersea is changing: property prizes going well beyond local people’s budgets, riverfront views are blocked by multi-story buildings and very few new flats will eventually house locals while oversea investors and developers will make a fortune. As Will Martindale says “This is our riverfront. It’s part of our shared heritage, not simply a strip of real estate. We would do well to remember Battersea Council’s old motto: Not for you, not for me, but for us.”

At the moment, our impression is that it’s becoming ever more theirs…

 

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Battersea Power Station: ghost flats worth £1.8bn!

Versione in Italiano

We learned from the pages of London Evening Standard that “More than £1.8 billion worth of homes have been sold at Battersea Power Station since they went on the market in January last year”. None on these flats have been built yet.

Apparently most of this £1.8 billion came from the fortunate global launch that Battersea Power Station Development Company organized last month.  As we already suspected, the search for overseas investors has not been affected by fear of the chinese property bubble bursting – the due date of which is still under discussion among financial analysts.  The threat of a Mansion Tax did not slow the rush of foreigners to use their deep pockets in order to get their piece of Battersea Power Station. Even if the London property market, as shown in Estate Agents Knight Frank’s report (see below), has appeared to slow down in the last few months, off-plan sales seem to work pretty well.Taking Battersea Power Station as reference for this trend, The Newstatesman  recently reported that:

“Off-plan profits hit the headlines last week with reports that a studio flat in Battersea power station, sold for close to £1m in the spring, is now due to go back on the market for up to £1.5m before it has even been built.”

Before anything has even been built, and while our concerns about the “Big Bang” business model of monstrous development projects are all to be proven erroneous, Battersea Power Station Development Company has actually done what all Battersea Power Station’s previous developers have already proven to be masters at: demolition!

Battersea Power Station: photograph taken by Spectacle on 08/12/2014

The first chimney of Battersea Power Station is gone. In the next weeks we will probably see it to come slowly back to a new life while the other three will start coming down all at once. We hope that the £1.8 billion will give Battersea Power Station Development Company enough energy to prove that, other than demolitions, they are good at building too.

 

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Selling Battersea Power Station over stormy seas

Versione in Italiano

 

Why has the demolition of the south west chimney at Battersea Power Station apparently come to a stop?

The chimneys as they appeared on September 27th

The chimneys as they appeared on September 27th

Chimneys on October 21th

Chimneys on October 21st

Maybe the project has hit a technical snag- the chimneys are far more robust than the Battersea Power Station Development Company have wanted to admit – but it could also be that it is a barometer of the global economy and an indication of how vulnerable their business model really is. The business model of the current owners, like the previous ones, is a precarious one based on an ever increasing UK property market.

However the current economic climate is not looking good. The property market, according to most informed opinion, has plateaued and, in London, is in danger of going down.

Simon Rubinsohn, Chief Economist at Royal Institution of Chartered Surveyors, in an article about the UK’s Property Market says:

“As a result of the rebalancing in demand and supply, house price growth across the UK appears to be moderating […] prices are still projected to rise nationally over the next year and expected to increase by 2.6% on a 12 month view (compared with around 4% at the start of the year)”
The pound is getting stronger against currencies like the Euro (Milan and Paris are targeted cities for the Battersea Power Station Development Company), making London a less attractive investment and interest rates are going up.

(www.xe.com)

(www.xe.com)

The Labour Party, if they win the election in May 2015, which if due only to the metronomic pendulum swing of UK politics between the two major parties, is a distinct possibility, are promising a “Mansion tax” on all properties worth more than £2m (here is the Royal Institution of Chartered Surveyors’ opinion about the Mansion Tax).

Then there is the UK housing crisis, caused in large part by the selling of London property to foreign investors who have no intention of living in the properties they buy. Whoever wins the next election they need to address this and no solution will leave the property market untouched.

The Financial Times seems to support our worries in a recent article:

“Uncertainty around new property taxes, the strength of the pound on global currency markets and the introduction last year of a tax on homes held through companies have all contributed to the slowdown, according to those involved in trading properties.”

The same article gives us a quite impressive picture of the property market situation.

Some data about English Property Market, as published by Financial Times on

Some data about English Property Market, as published by the Financial Times.

Perhaps the emphasis on selling off-plan to overseas investors is because while there are plenty of rich in the UK  they might be a harder sell being better informed. Overseas investors, basing their judgement on futuristic artists impressions are unlikely to be aware of the smelly and disruptive waste processing plant with its hundreds of daily truck deliveries of reeking rubbish.

Our two faced Mayor of London Boris Johnson, ever the populist, plays it both ways, touring China promoting the London property market as an investment and for a local audience blaming that very market on the chronic housing shortage.

Boris Johnson at the launch of London City Island in Ballymore group sales event in Hong Kong, 18/10/2013) (from http://www.ballymoregroup.com/en-GB/news/41)

Boris Johnson at the launch of London City Island in Ballymore group sales event in Hong Kong, 18/10/2013) (from www.ballymoregroup.com)

It might be coincidence but in the week the Chimney demolition halted it was reported that the Chinese property bubble would burst soon, probably 2015, with catastrophic ripple effect on the global economy and international banking- possibly triggering a global crash.

As Bloomberg reported recently:

“The Chinese crash might make 2008 look like a garden party. As the risks of one increase, it’s worth exploring how it might look. After all, China is now the world’s biggest trading nation, the second-biggest economy and holder of some $4 trillion of foreign-currency reserves. If China does experience a true credit crisis, it would be felt around the world.
[…]
The potential for things careening out of control in China are real. What worries bears such as Patrick Chovanec of Silvercrest Asset Management in New York, is China’s unaltered obsession with building the equivalent of new “Manhattans” almost overnight even as the nation’s financial system shows signs of buckling. As policy makers in Beijing generate even more credit to keep bubbles from bursting, the shadow banking system continues to grow.”

This week the Battersea Power Station Development Company launched their overseas selling campaign of luxury apartments. Three of the cities targeted are Beijing, Shanghai and Hong Kong- all especially vulnerable to the vagaries of the Chinese economy.

The new owners are no different to all the previous owners – they are just better at PR and have better access to overseas markets. As before, despite the excellent PR hype suggesting that “at last work has started”, bolstered shamelessly by a “purse whipped” English Heritage, the only thing the current owners have actually done is demolish – they are taking down the chimneys, demolishing the precious, Grade II listed Victorian pumping station and removing the iconic listed cranes.

In other words the new owners are just flipping the Battersea Power Station. Selling today artists impressions of what MIGHT be built in the future.

We wonder what guarantees prospective buyers have that the off-plan flats they are buying will actually materialise. But then, having more money than sense, they probably do not care.

 

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Battersea Power Station in vendita per mari perigliosi

English Version

 

Come mai i lavori di demolizione della ciminiera sudovest di Battersea Power Station sembrano essersi fermati?

The chimneys as they appeared on September 27th

Come apparivano le ciminiere di Battersea Power Station il 27 settembre scorso

Chimneys on October 21th

Le ciminiere di Battersea Power Station il 21 ottobre

Il progetto si è forse incagliato su qualche scoglio tecnico – le ciminiere sono molto più resistenti di quanto la Battersea Power Station Development Company sia disposta ad ammettere – o dipende dall’andamento dell’economia globale e si tratta, quindi, di un indicatore sulla vulnerabilità del piano finanziario del progetto? Il modello economico seguito dagli attuali proprietari, così come dai precedenti, è alquanto precario basandosi in gran parte sull’idea di un mercato immobiliare britannico in continua crescita.

Guarda caso le previsioni economiche attuali non guardano al bello. Il mercato immobiliare, secondo le opinioni degli esperti, è in stagnazione e, a Londra, corre il rischio di deflazione.

Simon Rubinsohn, Chief Economist del Royal Institution of Chartered Surveyors, in un articolo mercato immobiliare nel Regno Unito afferma:

“As a result of the rebalancing in demand and supply, house price growth across the UK appears to be moderating […] prices are still projected to rise nationally over the next year and expected to increase by 2.6% on a 12 month view (compared with around 4% at the start of the year)”

La sterlina sta diventando sempre più forte nei confronti dell’Euro (Milano e Parigi sono obbiettivi per il mercato della Battersea Power Station Development Company), rendendo Londra una città meno attrente in cui investire, con tassi di interesse in crescita.

(www.xe.com)

(www.xe.com)

Il partito laburista, in caso di successo alle elezioni generali di Maggio 2015 – possibilità dovuta al fatto che l’alternaza tra i due maggiori partiti della politica britannica è inevitabile come il movimento di un metronomo – ha promesso la cosiddetta “Mansion Tax”, una tassazione aggiuntiva su tutti gli immobili di valore superiore a 2 milioni di sterline (qui è possibile leggere l’opinione del Royal Institution of Chartered Surveyors sulla Mansion Tax).

Poi c’è la crisi abitativa, causata in gran parte dalla vendita di immobili londinesi a investitori stranieri, i quali non hanno nessuna intenzione di vivere nelle case che comprano. Chiunque vinca le prossime elezioni dovrà mettere mano a questo problema, e qualuque possibile soluzione avrà inevitabili ricadute sul mercato immobiliare.

The Financial Times, in un recente articolo, sembra supportare le nostre preoccupazioni:

“Uncertainty around new property taxes, the strength of the pound on global currency markets and the introduction last year of a tax on homes held through companies have all contributed to the slowdown, according to those involved in trading properties.”

Lo stesso articolo è corredato da una fotografia impressionante della situazione che sta attraversando il mercato immobiliare.

Some data about English Property Market, as published by Financial Times on

Dati riguardanti il mercato immobiliare britannico, pubblicati su The Financial Times.

Può darsi che l’enfasi riposta sui piani di vendita a investitori stranieri, quando c’è abbondanza di ricchi anche nel Regno Unito, sia dovuta al fatto che gli investitori locali siano più difficili da convincere visto che sono meglio informati. Gli investitori stranieri, che fondano i loro giudizi su impressioni artistiche e futuristiche, sono probabilmente inconsapevoli dell’olezzo disgustoso proveniente dall’impianto di smaltimento dei rifiuti presente nell’area, con le centinaia di camion che quotidianamente vi riversano fatiscenti carichi d’immondizia.

L’eclettico Sindaco di Londra Boris Johnson, anche nella sua versione più populista, fa il doppio gioco: va in tour in Cina per promuovere investimenti nel mercato immobiliare londinese, mentre al pubblico londinese indica proprio questo modello di mercato come causa della cronica mancanza di abitazioni.

Boris Johnson at the launch of London City Island in Ballymore group sales event in Hong Kong, 18/10/2013) (from http://www.ballymoregroup.com/en-GB/news/41)

Boris Johnson interviene al lancio delle vendite del London City Island, in un evento organizzato dall’impresa Ballymore il 18 ottobre ad Hong Kong. (Fonte: www.ballymoregroup.com)

Può darsi che si tratti di una coincidenza, ma nella stessa settimana in cui la demolizione della ciminiera si è fermata sono stati pubblicati resoconti che indicano come la bolla immobiliare cinese stia per esplodere presto, forse già nel 2015, con catastrofiche ricadute sull’economia globale e sulla finanza internazionale – con la possibilità di innescare una crisi globale.

Come riportato recentemente da Bloomberg:

“The Chinese crash might make 2008 look like a garden party. As the risks of one increase, it’s worth exploring how it might look. After all, China is now the world’s biggest trading nation, the second-biggest economy and holder of some $4 trillion of foreign-currency reserves. If China does experience a true credit crisis, it would be felt around the world.
[…]
The potential for things careening out of control in China are real. What worries bears such as Patrick Chovanec of Silvercrest Asset Management in New York, is China’s unaltered obsession with building the equivalent of new “Manhattans” almost overnight even as the nation’s financial system shows signs of buckling. As policy makers in Beijing generate even more credit to keep bubbles from bursting, the shadow banking system continues to grow.”

Questa settimana la Battersea Power Station Development Company ha portato i suoi appartamenti di lusso in una campagna di vendite in giro per il mondo. Tre città raggiunte dalla campagna sono Pechino, Shangai e Hong Kong, tutte particolarmente esposte agli alti e bassi dell’economia cinese.

I nuovi proprietari non sono molto diversi da quelli precedentivi – sono solo più bravi in PR e hanno un migliore accesso ai mercati internazionali. Come in passato, nonostante gli eccellente battage pubblicitario sostenga che “finalmente i lavori sono iniziati”, sotenuto senza pudore dall’English Heritage, l’unica cosa che i nuovi proprietari hanno fatto in realtà è stato demolire – stanno abbattendo le ciminiere, demolendo la deliziosa e protetta Victorian pumping station e rimuovendo le iconiche (e protette) gru.

In altre parole i nuovi proprietari stanno facendo il loro gioco con la Battersea Power Station. Vendono oggi immagini fantastiche di ciò che POTREBBE essere costruito in futuro.

Ci chiediamo che tipo di garanzie vengano fornite agli eventuali acquirenti stranieri circa il fatto che gli apparatamenti che stanno comprando sulla carta vengano effettivamente realizzati. Alla fine, avendo costoro più soldi che giudizio, forse gli non importa più di tanto.

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Business model of Battersea Power Station flawed

The business model of the development of the Battersea Power Station is flawed. It only needs a slight shift in interest rates or property taxes, or for the value of the pound to rise relative to Asian currencies for the foreign investor led property market boom to collapse according to Bloomberg.

tulip

It is this flawed and precarious property bubble that Transport for London (TfL) is sinking billions of pounds of public money to prop up.

At the recent public inquiry into the Northern Line Extension the response from the representatives of TfL to the many compelling arguments against the scheme made in Battersea Power Station Community Group’s objection was to insist the NLE was not aimed at solving local transport infrastructure issues but to enhance property values in the so called Vauxhall Nine Elms Battersea Opportunity Area.

In this time of austerity can this really be a good use of public money? It is also probably one of the most useless, unwanted and extravagant public infrastructure projects ever proposed.

OLYMPUS DIGITAL CAMERA

London’s status as a magnet for foreign property investment was burnished in the years after the financial crisis by an investor-friendly tax regime and the falling value of the pound. That may be changing.

A new capital-gains tax on homes sold by people living abroad and a growing British economy that’s lifting the currency may dull the capital city’s appeal to property buyers from abroad. Chancellor of the Exchequer George Osborne announced the new capital-gains tax in a statement to Parliament on Dec. 5. It will apply to “future gains” after the tax goes into effect in April 2015, he said without specifying the size of the levy. Capital-gains tax rates for second homes of U.K. residents currently range from 18 percent to 28 percent. Labour Party leader Ed Miliband and Nick Clegg, head of the Liberal Democrats, which govern in a coalition with Prime Minister David Cameron’s Conservative Party, support an annual levy on houses valued at more than 2 million pounds known as the mansion tax. Cameron opposes the idea.

Other than that, South Asian buyers account for two-thirds of new London homes sold before completion, according to Land Securities Group Plc, the largest U.K. real estate investment trust. The high-end market is dependent on pre-sales to overseas buyers to help get development finance and deal with rising land costs, Michael Lister, a lecturer at University of Westminster, said in a Nov. 22 interview. Singapore and Hong Kong, two destinations also favored by south Asian buyers, have introduced measures to cool property prices and curb speculation. Singapore linked borrowers’ maximum debt levels to their incomes and raised transaction and capital-gains taxes. Hong Kong has increased minimum down payments six times in fewer than three years and in February doubled stamp-duty taxes for all properties over HK$2 million ($258,000).

To end with, the pound plummeted against a basket of major currencies after the collapse of Lehman Brothers Holdings Inc., making London homes a relative bargain for wealthy investors and buyers from emerging Asian economies. The Singapore dollar gained 60 percent against the pound from September 2007 to June this year and the Malaysian ringgit climbed by 50 percent. Since then, the pound has risen 6.8 percent and 12 percent respectively against the Asian currencies.

Farmer of EC Harris said:

“One of the key drivers around demand in that market, particularly from the Far East, has been the relative weakness of sterling over the last three or four years,”“The improving economy is good for U.K. Plc but it might make residential investment slightly less competitive or good value in the eyes of the international community.”

View the full article.

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2012 London Olympics: Bad for business

The influx of tourists to the city for the 2012 London Olympic Games had caused excitement among businesses all over London, yet statistics show that during the Olympic period, UK retail sales fell and online sales plunged the most in five years.

Shoppers – both online and on the high street – were said to be distracted by the Olympic Games, causing an unanticipated drop in sales. Economists predict further falls in UK retail sales due to inflation and weak consumer confidence.

For more details, read the article on the Bloomberg website

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