To readers of the Daily Telegraph it’s Britzerland. Devotees of The Spectator know it as Planet London. Whatever you call it, the economic gulf between the capital and the rest of the UK is widening. This week saw another step change.
A joint venture led by Malaysian investor SP Setia exchanged contracts on Battersea Power Station on Wednesday (p36). The £400m it is paying will be staggered, but the jv expects to spend a further £200m developing the scheme over the next two years. The Battersea experiment has failed before, of course, but it’s clear that, in London at least, the Olympics have not sated the appetite for massive regeneration projects.
Meanwhile, Thursday saw the inauguration of the Shard by Qatari prime minister Sheikh Hamad Bin Jassim Bin Jabor Al Thani and the Duke of York (p39). A trip to the top was followed by a dinner across the water attended by the capital’s great and good. A laser show that lit up the London skyline rounded off proceedings. It was as spectacular as it was out of step with the diminished times in which we live.
But that’s the point; Britzerland is on a different planet right now.
Explaining its decision to invest, Setia acknowledged as much: “The current dynamic of the London real estate market is extremely attractive and the board is optimistic that the project is going to be a significant success and the catalyst for strong rental and capital growth in the area.”
Ali Shareef Al-Emadi, chief executive of part-funder Qatar National Bank, suggested more Middle Eastern money would follow: “For us, the Shard and all it represents is a symbol for Qatari investment here in London.”
But perhaps the most striking comment around London’s position came from Jeffries analyst Mike Prew. “There is fervent activity in the real estate market, at least in ‘Great Britzerland’. It’s located in the bottom right-hand corner of the UK within the M25 motorway. Although geographically it is London, economically it behaves more like Switzerland with its safe haven status.”
And how does all this play in the European economic league table? Said Prew: “Britzerland comes out top across Europe, whereas Britain overall ranks eighth or ninth.”
It is not always the case, but the low regard in which the property industry currently holds banks mirrors the mood of the public. In this week’s Big Question, 80% say banker bashing is justified (p52). Almost 25% say they or their clients have been mis-sold hedging products. But barely 12% say they will be moving bank as a result of the Barclays scandal. It’s a curious combination of anger and inertia.
It is the one in four who claim mis-selling that is most interesting. The cost of unwinding swap positions taken out at the top of the market is clearly hampering recovery – for many borrowers and lenders it is the biggest single obstacle to recovery.
It is tempting to see a parallel with last week’s Financial Services Authority report on banks mis-selling swaps to thousands of small businesses. There banks were rightly castigated for forcing a family butchers, to use one example, to take out a hedging position on a commercial mortgage.
It is harder to conceive that “sophisticated” commercial property investors will be able to claim so clearly that they did not understand the potential liabilities to which they were exposing themselves. Some will, no doubt, and lawyers will make hay.
The deadline for the Estates Gazette Awards is looming. You have until 20 July to submit entries in 16 categories – including, new for this year, residential adviser and property company and investment manager. For more reasons to enter turn to page 220, where we take a look at last year’s winner of Young Property Professional of the Year. To enter click here.
Damian.Wild@estatesgazette.com
