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.

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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.

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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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Opponents of the Northern Line Extension, and why they’re right

At the start of this year, January 28, there was already opposition against the extension of the Northern Line. Liberal Democrats in Lambeth have suggested a Docklands-style light rail or monorail link between Waterloo, Vauxhall and Battersea as an alternative. Local campaigners also question the transport benefits of adding an extra branch to an already complicated and overcrowded rail route like the Northern line.

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“The only way to relieve the existing crush let alone cope with the massive influx of fresh commuters being generated by the Vauxhall Nine Elms Battersea new town is by a completely separate system,” say the Lambeth Liberal Democrats in an unsigned comment piece published on the party website.”

”We’ve suggested it before and we’ll say it again, there needs to be a thorough appraisal of a light rail elevated transport system like the Docklands Light Railway.”

”Common sense suggests that this would be massively cheaper than a deep-bored tube line and it could even be a 21st-century monorail system rather than the slightly Trumpton-esque DLR.”

”It could also run all the way to Waterloo – maybe attached to the existing railway viaduct – and later linked to the DLR. After all there’s massive regeneration going on south of the river all the way from Wandsworth to Southwark.”

See the full article.

More recently, the Guardian reported about the concerns of Battersea Dogs & Cats Home:

Battersea Dogs & Cats Home is demanding Transport for London (TfL) reconsiders plans for the Northern line extension over fears it will force its animals to be relocated.

The rescue home, in Battersea Park Road, Battersea, is within touching distance of a new station planned to open at Battersea Power Station.

Chiefs at the charity have said the welfare of the animals could be affected during construction, while the extension would mean the rescue home could not expand in the future.

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The Evening Standard reports that the rescue home has joined the Beefeater Gin distillery in nearby Kennington, to write to the Transport Secretary opposing being made to sell large swaths of property. It would have to vacate 70 per cent of its site on a 14-day notice, it says, under legislation proposed by TfL.

In the letter to Patrick McLoughlin, seen by property website CoStar News, home chief executive Claire Horton calls TfL’s sweeping powers “excessive”, adding that the transport body “has insufficient understanding of the complexity and sophistication of the facilities at our building”.

Chivas Brothers, operators from the Beefeater distillery, has also written objecting to TfL’s plans to compulsorily purchase land for a ventilation shaft. The company says dangers posed by the construction would prevent it operating on the site.

Enough reasons to reconsider the Northen Line Extension, so it seems.

Michèle Dix, managing director of planning for TfL, said: “We are working through a Transport and Works Act Order process and are not expecting a decision on the Northern line extension from the Government until summer 2014.

Click Battersea Power Station for more blogs
See our Battersea Power Station project pages for more information and videos.
Or visit PlanA our general blog on urbanism, planning and architecture.

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