Editor’s Choice: Summer house sales

July is the month that holiday makers around Europe head for their beach houses, luxury apartments or other summer residences.

But in London this week, a group of young first-time home buyers had their eyes set on getting a foot in the door of a permanent residence in the UK capital. And not without success. Roughly half of those who signed up this week for the 208 apartments of the Maine Tower in Canary Wharf were local buyers seeking to get onto London’s housing ladder. The remaining 50% of buyers, according to the developer Galliard Homes, were from overseas – primarily Greece, France, Italy, India, the Middle East and Asia.

Located close to Millharbour Dock Basin, Maine Tower is designed by architect Rolfe Judd and provides a total of 297 apartments and penthouses for private sale. It is part of Harbour Central which consists of the £550 mln transformation of a 2.65 acre industrial site into a new Manhattan-style vertical village for Canary Wharf.

Commenting on the sale of the apartments – which were sold out for a total £140 mln or €200 mln within four hours after the development was unveiled – Galliard’s sales director noted that it's not everyday in London that a resi skyscraper virtually sells out during a launch. ‘The volume and speed of sales at the Maine Tower launch was incredible and shows the confidence that buyers from both the UK and overseas currently have in the London property market.’

Getting into bed with developers
The drivers of the high prices of London residential properties have been well-documented. So it comes as no real surprise that buyers were queuing up for a modest studio or one-bedroom flat that Galliard has on offer – despite the fact that construction of the tower has not yet started and the project is not scheduled for completion until early 2019. In fact, residential is so hot in London that some investors are even prepared to get into bed with the developers.

That is exactly what Singaporean listed property developer Oxley Holdings has done. Barely 24 hours after Galliard announced that the Maine Tower apartments had been sold ‘at lightening speed’, Oxley announced this week that it has acquired a 20% stake in the enlarged share capital of the UK residential developer for £50 mln (€72 mln).

The deal gives the Singaporean investor a stake in London’s largest privately owned residential developer and the second largest house builder in the capital. Galliard Homes currently has over £1.6 bn worth of forward sales, with nearly 6,000 residential units under construction. The group has sites in planning with a completed value of £2 bn.

Oxley is not the only investor that has wooed the UK developer. Galliard is developing Maine Tower in Canary Wharf in a joint venture with Cain Hoy and Frogmore. Cain Hoy was set up in London in September 2014 with a minority shareholding from US investor Guggenheim Capital while Frogmore is another UK-based real estate investment manager which recently closed on its third real estate fund Frogmore Real Estate Partners III.

But Oxley is going a step further in acquiring a stake in the residential developer. The acquisition strengthens Oxley's presence in the UK capital where it already owns Royal Wharf, a new waterfront village located in East London. Oxley, which operates in Singapore, across southeast Asia, the UK and Ireland, said the partnership will allow it to capitalise and leverage on Galliard Group’s construction and property development expertise and operating network and contacts in the UK.

‘This investment marks our strategic alliance in London with a leading well-established and reputable property developer,’ said Oxley’s chairman & CEO Ching Chiat Kwong. ‘Galliard has a well proven track record and this acquisition signals our confidence in the UK property market and London in particular. We foresee significant collaboration with Galliard’s vertically integrated business model with that of Oxley.’

Competition is a fact of life
Competition from foreign home buyers, investors and developers is becoming a fact of life in London’s housing market. China’s property and entertainment conglomerate Dalian Wanda Group is spearheading the Asian wave and is currently developing a 205-metre high residential tower at One Nine Elms. The mixed-use development will comprise 1 million sq ft of prime residential, office and retail space within two towers of 45 and 60 storeys respectively, connected by a high-level link bridge. On completion in 2017, the value of the Central London development is expected to be over £700 mln.

Local partnerships also continue to flourish. On Friday UK developer Southern Grove announced it has joined forces with private investor Topland Group to acquire a retail block at 104-110, The Broadway in the London borough of West Ealing with the aim of transforming it into a new residential and retail scheme.

Inevitably, the sustained strong domestic and foreign demand for London residential is translating into further rises in prices. London already stands at the top of the luxury pyramid: a chart by advisor Knight Frank shows that US$1 buys just 21 m2 of resi in London, compared to 17 m2 in Monaco and 20 m2 in Hong Kong. By comparison, home buyers in Paris can buy 50 m2 for the same price.

London is also expensive for 'ordinary' work folk. According to Savills' latest Live/Work Index, London has retained its place as the world’s most expensive city for businesses to accommodate their employees although Hong Kong and New York are beginning to close the gap.

This is also borne out by the prices paid for the 41-storey Maine Tower: figures supplied by Galliard puts the price per sq ft at £1,200, up from £1,100 a year ago. Indeed, strong demand for Canary Wharf and Docklands residential property will force the average price to £1,750 per sq ft by 2018, adviser Knight Frank reckons.

With residential prices set to spiral further in London, some UK holiday makers will no doubt be drawing comparisons with those in the location of their temporary residence this summer. And every chance that their summer abode is a less expensive deal than their dream home in the UK capital.

Pity that most of us have to go back to work at some point.

Judi Seebus
Editor in chief

ps: Editor's Choice will be replaced during the summer period by a new weekly feature combining analysis and commentary from our Deal Editors. Watch out for our new PropertyEU Deal Watch next week in your email box