LONDON - Not a day seems to pass without stories of Brexit and the effects it will have on the future of London and the rest of Britain. For London the news has been about the role Brexit would have for the financial services and property market especially the luxury sector. Whilst the bureaucrats discuss the scheme for Britain’s EU departure the city continues to deal with the fall out from the June 2016 referendum.
Also being held responsible for a fall in purchases is the stamp duty bill for a £1.5million home has increased by £18,750 to £93,750 while the cost on a £2million home is now £53,750 up to £153,750.
One case that can be examined is that of the Lillie Square East premium property development in London’s Earls Court (Hammersmith & Fulham and Kensington & Chelsea). Located just off Brompton Road where Kensington, Chelsea and Fulham come together this 77 acre regeneration plan designed by Sir Terry Farrell has like other developments had its share of issues following the Brexit vote. The original development once the four phases are completed planned for 7,500 homes. The development is a joint venture by Earls Court Partnership Limited with 63% ownership by Capital & Counties Properties Plc and 37% by Transport for London.
Known as the The Earls Court Opportunity Area, Lillie Square is regarded as one of the most high-profile developments in London. The plan developed by Capital & Counties Properties Plc (Capco) and KFI includes ‘transforming a 7.4 acre car park on Seagrave Road into 808 high-end new homes offering a modern garden square living.’ The development is being constructed in phases and completion is expected the end of 2016 to 2018. Phase one is now completed with a few penthouse residents available.
Residential units included 1,2 & 3 bedroom units including 608 private homes and 200 affordable home units. Parking is available for 2 and 3 bedroom units at £75,000 along with the rail links of West Brompton Tube Station on the District Line and the London Overground service. One bedroom flats were offered with prices starting at £595,000.
The scheme additionally ‘... will create a new district of squares beside the Lost River Park lined with restaurants and cafes and a new High Street that will connect North End Road in the west to Warwick Road in the east.’
Amenities with membership include the Lillie Square Clubhouse which provides the use of a pool, a health spa, sauna a steam room and ‘...lounge area with inviting sofas and chairs is open day and night, while a private dining room and screening cinema can be booked in advance for private events.’
Phase two of Lillie Square, Lillie Square East, which is planned for a 2018 completion is described by the developer as ‘... introduces a broad range of luxury one, two and three bedroom lateral homes and a collection of duplex apartments with their own private gardens. Set across four low-rise mansion blocks overlooking the main garden square, the new residences will incorporate distinctive architectural features and elegant proportions.’
This phase will have 186 apartments at 485 sqft. to 2,587 sqft. with a £5000 non-refundable deposit. Almost 41 of 70 units have sold with prices at 4% higher than those in phase one.
‘A new 'Lost River Park’ designed by RHS Chelsea Flower Show Gold Medallist Andy Sturgeon, will stretch five acres across the full 77 acre Earls Court development site, following the line of one of London's famous lost rivers, Counters Creek.’
This entire development plans on creating 10,000 new jobs and over £450 million in community benefits.
At the end of January 2017 the Royal Borough of Kensington and Chelsea gave its approval for the next phase of the masterplan, Exhibition Square. The development will have two buildings designed by architect KPF consisting of 139,00 sq ft with 69,000 sq ft for a hotel and 62,000 sq ft for office space. From new High Street connecting with North End Road and Warwick Road will be there will be a total of 3000m sq of open public realm and adjacent to the Exhibition Gardens will be 1300m sq of green space. Also being provided is a new entrance to the Earls Court Underground station which will be connected directly to the new property.
In July 2016 Bloomberg reported that Capital & Counties Properties Plc (CapCo) wrote down the value of the Earls Court district by 14% for the luxury market with concerns values may decline another 10%. For the Lillie Square development the value of plots were lowered to £1.2billion from £1.4billion. It was also reported that unit sales had dropped to one unit every two weeks.
The number of unsold homes under construction in London was expected to reach a record high of almost 11,000. Earls Court is not alone in land value weakness due in part to ‘...increases in taxes and rising values dampened demand, and home prices there are now almost 11 per cent below their 2014 peak, according to broker Savills.’
Bloomberg quoted a Knight Frank broker as saying ‘Banks are less willing to lend for site acquisitions and construction, fuelling the decline in values...Developers also need to raise their profit margins as a buffer against any further falls in home prices.’
The FT reported in November last year: ‘Meanwhile, Knight Frank is selling a one-bedroom apartment in Lillie Square for £785,000. To date, says Capco, all homes there have sold for the asking price.’
CapCo recently reported adjusted 2016 financial results that the Brexit vote and stamp duty had created adverse effect on prime property at Earls Court causing a decline of 20% of value. In 2016 the 77 acre site was valued at £1.1billion whereas one year earlier the value was at £1.4billion.
On 22 December 2016 CapCo announced that an amendment to the plan would bring the number of new homes from 7,500 to 10,000 with the help of Mayor Sadiq Khan’s London Plan to increase the number of affordable homes. This key element of his manifesto for London planning is to increase affordable home availability by 50% and to have the properties tied to new infrastructure transport projects including Docklands Light Railway extensions, the Bakerloo Line extension, and Crossrail 2.