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London Update June 2008 Young Index (Annual Survey)
Mayor to Make Major
Modifications NOT UNLIKE Marmite, Boris Johnson is loved or loathed. To those on the right, London’s new mayor is refreshingly politically incorrect, while many on the left see him as bordering on the bigoted. He is embraced by the SUV-driving crowd and rejected by Greens (his trademark bicycle notwithstanding). But while transport and crime were key issues during the mayoral election, it may well be Johnson’s policies on housing that prove to be the litmus test of his success or failure as a mayor. Johnson laid out in detail his housing policy in a manifesto document, Building a Better London. Some areas of policy are relatively uncontroversial: he pledged, for example, to spend £60 million to bring London’s 84,000 empty homes back into occupancy. There are also some areas of continuity of policy. Neale Coleman, the GLA adviser on the 2012 Olympics remains in his job and will continue to oversee the implementation of regeneration and new development in the Thames Gateway, as well as preparations for the Olympic Games. However, in other areas, there will be a definite shift in focus. While Johnson has reaffirmed the commitment to affordable housing, pledging to build 50,000 new affordable homes by 2011, he has scrapped the requirement for all new developments to contain 50 per cent affordable units. He argues that the “target culture” which existed under the Livingstone regime has failed to deliver the number of affordable units required, and instead has promised to allow individual borough councils greater flexibility over the delivery of affordable properties.
Will Boris Johnson, Mayor of London, make significant changes to the Capital’s Planning Regime and Housing Policy? It is thought that Johnson will try to deliver more housing overall, and while the proportion of affordable properties is likely to be lower in percentage terms, the number of units delivered could be higher. Nevertheless, the shift in affordable policy will require a significant review of the London Plan, the current document which deals with planning issues inside Greater London, an exercise which some experts believe could take as long as two years. As a result, developers should not expect a radical change in the approach to affordable housing issues in the short term. A key tenet of Johnson’s strategy for London is to help first time buyers who are currently excluded from Government schemes, extending the qualifying income threshold so that households earning up to £52,500 will qualify. He has proposed to spend £130 million from the Regional Housing Pot to launch the ‘FirstSteps Housing Scheme’, while at the same time releasing surplus land from the Greater London Authority (GLA) estate for new housing. Properties in the FirstSteps scheme will be sold at 20 per cent below market rate. There has been some scepticism over these proposals, with some experts suggesting that all Johnson will do is help the slightly better off at the expense of the worse off. “There is a problem here, in that targeting one group over another in terms of access to housing or the receipt of subsidy does little more than shift the affordability problem around the population,” says Liam Bailey head of residential research at Knight Frank. “Pouring subsidy into the system without raising development volumes will actually harm other groups by raising the cost of housing generally.” While developers have welcomed the more relaxed attitude to affordable housing targets, the appointment of Sir Simon Milton, the leader of Westminster City Council, as the new head of planning was greeted in some quarters with less enthusiasm. Sir Simon is known to be anti-skyscraper, arguing that “the fetish for tall buildings will be a disaster for London”. Those who believe that building upwards rather than outwards is the only practical way to solve London’s chronic housing shortage will be watching carefully the outcome of a planning application for three new towers on the Southbank, which is due to be decided in late July. The three towers, which range from 20 to 33 storeys high, would stand directly behind the Royal Festival Hall and could, according to English Heritage, ruin views of Big Ben and Westminster Abbey. Those supporting the construction of the new buildings say that they will play a critical role in the desperately-needed regeneration of the Waterloo area. While the decision on the planning application will be made by Lambeth Council, Johnson can instruct them to refuse permission if he wishes to do so. Johnson is also concerned with improving the quality and range of property available to Londoners. “Design quality must be central to London’s housing strategy,” he writes, pointing out that, according to the Commission for Architecture and the Built Environment, 84 per cent of new housing in London is considered to be poor or average. Property investors will be pleased to hear that Johnson “recognises the importance of the buy-to-let sector in London”. While pointing out that the average monthly rent is now 33 per cent higher than in 2000, he has ruled out fixing rent levels as has been done in some parts of Germany and the Netherlands. He has pledged, however, to oversee the creation of an online borough-by-borough rental guide to help tenants find out whether or not they are getting good value for money.
While the overall thrust of Johnson’s housing policy has been welcomed, property experts are sceptical of his ability to deliver. “Drafting election pledges is the easy part of creating a housing strategy, implementation will be an awful lot harder,” Bailey says. Moreover, Bailey suspects that increasing the number of new builds is going to be tricky in current market conditions. “Over the next few years overall development volumes will be far lower than national or local government would like. The number of year-on-year new build sales have been at least 25 per cent lower so far in 2008 and if purchasers continue to find difficulties in accessing mortgage finance, sale numbers will remain low and developers will not be encouraged to bring land forward for development.” In the meantime, we wait to gauge the impact that the shift in housing and development policy brought about by the change of mayor will bring. Written by Paula Hawkins – Paula writes on the residential property market for a range of national newspapers including The Times, The Independent, The Sunday Telegraph and the Evening Standard. Paula has also written a guide to personal finance, published by Penguin Books. Government Sticks By Housing Targets Caroline Flint, housing minister, has confirmed that the government will not lower its ambitious housing targets. Speaking at the British Property Federation’s annual conference, Flint insisted that “the demand for housing only continues to increase.” Reported in property industry magazine, Estates Gazette, Richard McCarthy, director general of Housing and Planning at the Department of Communities and Local Government (DCLG), said that the government was focusing on ways to incentivise house builders and encourage commercial developers to become greater involved in residential investment and development. The government has a target of 240,000 new homes a year by 2016. However, the number of new homes started in the first three months of 2008 (in England) fell by 24% on the same period last year, according to DCLG figures. Completions dropped 12% to 39,500 quarter-on quarter and 18%, year-on-year indicating that the disparity between supply and demand will remain, certainly in the short to medium term. Ministers Urged to Promote Private Rented Sector In its new report The Future of Renting, The British Property Federation (BPF) has called on the government for a “radical reshaping of the housing market”. It calls for ministers to widen the definition of affordable housing to allow developers to build market rentals, give special planning treatment for rental-only developments, cut stamp duty rules that penalise large investors and refine the real estate investment trust regime to allow residential REITs. The BPF’s residential director Ian Fletcher pointed out, “We’re in a ridiculous position where we have increasing demand yet house builders are stepping out of the market.” He pressed for a corporate rental sector, similar to that seen in Europe, which would drive continued investment and construction of additional new homes, ensuring that the major Housebuilders had a market for their stock and that the public had the benefits of a branded rental sector. Tiny Tenancy Deposit Scheme Disputes One year on from the introduction of mandatory tenancy deposit protection, The Tenancy Deposit Scheme (TDS) reports that only 2% of tenancies have ended with a dispute over the deposit. The scheme has 409,215 landlords registered with it, with total deposits valued at over half a billion pounds, and is one of three such schemes authorised by the government. Rental Market Strong The buy-to-let market remains strong despite the reduction in available mortgage products, the National Landlords Association (NLA) believes. The NLA’s latest figures show that average UK rents increased by 13.8 per cent in the 12 months to April 2008, with the market holding up due to the fact that first time buyers are struggling to get on the property ladder and an increasing number of would be purchasers are choosing to rent as they wait for the market to settle and more attractive mortgage finance to be more freely available. The NLA points out that this increased demand creates an increase in rent and, for the professional landlord, opportunities to expand their property portfolios. Base Rate Held The Bank of England (BoE) Monetary Policy Committee voted to hold the base rate at 5.0% in June. The outcome was predicted by Young Group as despite the MPC’s desire to ease the housing market by lowering the base rate, the the BoE is being hampered by several factors, not least rising inflation. Easing Housing Pressure The latest Jones Lang LaSalle residential market forecast predicts that although the housing market will remain weak in the coming year, it will recover strongly thereafter. The agent does not believe there will be a general de-rating of residential property in the UK nor that house prices are fundamentally overpriced, though their researchers do concede that house prices have recently become overheated. Jones Lang LaSalle described the market as, “The near-term outlook is very challenging but the horizon is clear.” Funds Flow into Property Mayor Boris Set to Widen London Views Boris Johnson has announced his intention to restore protection to London’s historic views in a move that could cast doubt over future tall developments in the capital, reversing former mayor Ken Livingstone’s campaign that allowed more tall buildings by sanctioning cuts of up to 80% from the St Paul’s and Palace of Westminster viewing corridors. However, during one of his first question time sessions, Johnson pledged that he would work to reinstate the 984ft historic viewing corridors when he revises the London Plan. The changes could blight plans for new schemes, but those with existing permission should be protected.
St. Pauls Cathedral to receive added protection from Major Johnson City Pride Development to Drive Landmark Values It has been widely reported - most noticeably by the BBC - that the City Pride pub in Canary Wharf has been sold for £32 million for redevelopment. The site borders Young Group’s iconic 31 and 45 storey development, The Landmark. Commenting on the sale of the site, Neil Young, Young Group’s CEO, pointed out; “We are aware of the City Pride transaction, which is good news for Canary Wharf as it demonstrates the continuing confidence in the area. The involvement of Lord Foster in looking at options for redeveloping the site will ensure a level of quality that will complement The Landmark and further enhance the area’s reputation and property values.” It is still very early days for the City Pride site and no planning application has yet been submitted, but as a matter of course, the council’s planners are obligated to take into account surrounding buildings as part of the planning consultation process before any approvals are granted. Young Group is watching development plans with excitement and will include news of the City Pride site’s progress in future London updates. Holloway Reaches First Base Elliot Lipton’s First Base has been given the go-ahead for a 119-flat, £35 million scheme in Holloway, N5. The developer will clear derelict buildings at 52 Holloway Road site later this year, and begin construction of the flats – to be built around a landscaped garden – early next year. Completion is expected in summer 2010 and the development will also include 2,860 sq ft of shops and office space. Royal Arsenal: Next Phase Revised for Crossrail Station
Scheme planned around Woolwich Crossrail Station Berkeley Homes has submitted an updated masterplan for the next phase of its Royal Arsenal development in Woolwich, SE18, which incorporates Woolwich Crossrail Station. The original masterplan for the scheme was given consent in August 2006; however, the plans have been altered to accommodate the new transport link – together with 1,200 additional homes. The scheme will also feature 270,000 sq ft of office space and shops, a 120 bedroom hotel and a large park. The first phase of Royal Arsenal is complete, containing 1,200 properties. Landmark Architect Chosen for Potters Field Berkeley Homes and Southwark council have selected Squire & Partners, architect of Young Group’s development, The Landmark, to draw up plans for the redevelopment of the Potters Field site, next to City Hall on London's famous Southbank. Initial designs should be made available for public consultation by the end of summer 2008. The announcement followed the signing of a co-operation agreement between principal landowner Southwark and Berkeley Homes which ended a three-year standoff. The agreement committed both sides to working together to find solutions for the future development of the site on the Southbank. Creative London Concept Unveiled The initial phase of “Creative London” - a £2billion, 43 acre residential and media hub - has been announced at London’s White City, W12. A consortium comprising Helical Bar, the BBC and Marks & Spencer, will transform the land into a 4.5 million sq ft mixed-use scheme designed by OMA on a site which is adjacent to the BBC’s 19 acre Television Centre. The BBC will vacate its site in 2012 as part of its move to Media City in Manchester. Canary Wharf Chosen for Crossrail Transport for London has announced that it has chosen Citigroup’s 25 Canada Square, Canary Wharf tower for the head office of its £16 billion Crossrail project. The team will take 116,074 sq ft at the 42 storey tower across floors 27 to 30, on a 10 year lease.
Commercial Lettings at Canary Wharf Remain Buoyant Development Update The latest Development Update was issued to Premier Clients earlier this month, charting the progress of the 10 development sites that are currently underway. Investors can view latest updates regarding construction progress, local area news and figures for comparable sales & rental values at any time by visiting the Past Opportunities section of the Young Group website. The Landmark Despite being more than 18 months from completion, there is plenty to report on progress with the development; which will be one of Europe’s tallest residential buildings. As Premier Clients will have seen from the last Development Update, construction is racing ahead and the exterior glazing is progressing well on both the East and West Towers.
The Landmark takes shape as glazing is added to both towers This month, we take the opportunity to provide a brief update on some of the work going on behind the scenes. Young Group is well on the way to appointing the team that will manage the estate on a day-to-day basis, once it has completed. Tim Collins, Young Group’s Commercial Director points out; “By appointing a quality estate management company at this stage, Young Group can work with them and the developer to ensure that measures to maintain and enhance the service quality at the development can be factored into the build process. This ensures that residents will experience the very best from the services and facilities at the development.” The Landmark: Designed for Living Young Group has also been working with leading interior design group, Blustin Heath, to conceptualise the look and feel of the imposing entrance lobbies and communal areas of the development, to ensure that the sleek, high quality, aspirational elements of the building’s exterior design are complemented inside. Blustin Heath have also designed The Landmark’s bathrooms and kitchens, which will be unveiled to investors shortly. The Landmark: Star of the Screen The iconic nature of The Landmark is causing a stir in the media. A number of TV production companies have scouted The Landmark with a view to using the impressive construction site as a backdrop to commentary on the property market and building technologies. Recently, Sylvana Young, Young Group’s COO, was filmed at the site by eTV for UKTV Style, following her recent industry recognition as London’s Property Woman of the Year.
The Landmark: Making a superb TV backdrop for UKTV Style Young London Our last London Update announced the
rebranding and expansion of Young Group’s letting team, and progress
is racing ahead on plans to open Young London’s first high street
lettings, sales and management agency at myBASE1 in Southwark this summer.
The legal process of securing the premises is now complete and the fit-out
team is standing by to transform the space into the first Young London
office once handover of the commercial space takes place. Young Group specialises in providing Property Portfolio Management services to private investors; offering the best off-plan direct investment opportunities in London, as well as access to indirect, development fund investment opportunities through its development arm, Young Property. Young Group manages the entire investment process. For direct investments this spans from sourcing the opportunities through to financing, furnishing and letting. Young Group owns all the property that it sells, and also retains a number of units in each development for its own portfolio. As the principal in every transaction, Young Group does not realise any profits until completion and has transacted in excess of 1,700 apartments, with a retail value of £700 million. The Group’s lettings division, Young Lettings, has successfully let the majority of investors’ apartments within a week of completion. Young Group supports NORWOOD and CHILDREN with LEUKAEMIA, two charities particularly close to our heart, donating £50 per property exchange. t: +44 (0)845 356 1000 e: info@younggroup.co.uk |
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