LONDON - London’s red-hot property market has struck a new record with the sale of a 140 million pound ($259 million) unfurnished apartment, but even the developer of the opulent building warned that some asking prices in Britain were unsustainable.
Buoyed by the wealth of Russian oligarchs, Chinese tycoons and Arab sheikhs, London has become one of the world’s most expensive markets, raising concerns ahead of national elections in 2015 that locals are being squeezed out of the market.
“We’re in boom-time prices, more expensive than we’ve ever been in the history of mankind,” said Nick Candy, one of the developers of London’s One Hyde Park luxury apartments, at the pinnacle of the capital’s super-prime residential sector.
“There is a concern over the market overheating,” he told Reuters. “Everyone thinks the main central London is doing so well, (so) the ripple effect is going throughout the UK, and some of the prices being achieved are probably unrealistic and not sustainable.”
But money is still pouring in, adding to concern about a property bubble in London.
House prices across Britain have not recovered their levels from before the financial crisis struck in 2008, but they are rising at about 10% a year, prompting some top policymakers at the Bank of England to sound increasingly concerned about the risks to the broader economy.
A source familiar with the matter said an Eastern European buyer bought a penthouse at the One Hyde Park apartment block for a record 140 million pounds.
Candy confirmed that a 16,000 square foot penthouse had been sold but declined to comment on the price or name the buyer. Developer CPC Group, which is run by his brother Christian, said the flat could be worth 160-175 million pounds when furnished.
Britain’s previous record for an apartment was set three years ago by Ukrainian billionaire Rinat Akhemtov, who paid 136 million pounds for a penthouse and apartment at One Hyde Park to knock together into one property.
There have been more than $2 billion in sales at the block, whose developer is a joint venture between CPC Group and Waterknights, the private company of Qatar’s Sheikh Hamad Bin Jassim Bin Jabor Al Thani.
Candy & Candy, run by Nick Candy, were the interior designers and development managers for the project.
The wall of money chasing a finite amount of property has sent luxury London prices soaring almost 80% since 2009, and while plutocrats’ ostentatious purchases grab the limelight, prices have rocketed even in poorer areas.
Prime central London house prices have risen 79.4% since March 2009, against a 40.6% increase in Greater London house prices over the same period, according to data from Savills.
Candy, who with brother Christian started out in 1995 with a 6,000 pound loan from their grandmother, said the main risks to the market were changes in government policy, a rise in interest rates or oversupply at the top end.
“If the political climate changes in either (London or New York), so in London next year the government wants to charge mansion tax and other taxes, the market might change. They might have a correction, a significant correction,” he said.
“I don’t see a massive correction unless a number of things happen, firstly a change of government, second of all, interest rates start going up high and inflation starts going.”
The British government has in recent months imposed new taxes on overseas purchasers, while the opposition Labour Party, which is leading in opinion polls for the national election, has proposed a tax on houses worth over 2 million pounds.
Rising prices have prompted a rush of luxury developments.
More than 20,000 residential units - worth over 1,250 pounds per square foot - are scheduled to be built in London over the next 10 years, building consultancy EC Harris said in December, adding that this was more than double the 2011 pipeline.
Grosvenor Group, the landlord for much of London’s upmarket Mayfair and Belgravia districts, said on Tuesday it had sold off 240 million pounds in luxury residential properties in 2013 and aimed to reinvest in cheaper districts, as it was concerned that prices at the top end of the market were vulnerable.
Such is London’s wealth that Property consultant Savills calculates 10 London boroughs now have an aggregate property value equivalent to the total value of Scotland, Wales and Northern Ireland combined.