Battersea data suggests weakening in demand for luxury new builds

Fresh data on resales at South London's luxury Battersea Power Station development suggested a loosening in the luxury new build market on Friday, with one property seeing a 38% decline in its asking price since July last year.

The data, from property firm Propcision, found 197 properties had been listed for resale at the developer's agency Battersea Power Station Estates since last year. Half of those listings had been reduced in price since listing, and 76 of them were reduced since the third quarter of 2015.

It was the latest sign that demand for prime housing stock was faltering in the capital, with reforms to stamp duty and capital gains tax putting many wealthy investors off.

"Middle Eastern and Far Eastern buyers are operating in economies that are driven by commodity prices, so they have reduced purchasing power – both on an individual basis in terms of buying residential property and on a corporate basis where the sovereign wealth funds can’t afford to spend as much money," Jefferies analyst Mike Prew told City A.M.

One four bedroom townhouse listed in July 2015 was reduced to £4m in February, from £6m at listing, a 38% decline. A one bedroom flat had its price cut four times to now sit at £600,000, from £820,000 at listing in April.

The data came in the same week as property agent JLL cut its growth forecasts for new-build luxury developments, with the firm warning prices would fall 3% in 2016 and wouldn't recover until 2018.

Morgan Stanley also warned recently that luxury new home prices could plummet by 10% to 20%, with increasing supply shooting beyond the dampened demand for such property.

Power station's history of failed development

Since de-commissioning in 1983, Battersea Power Station had gone through a series of failed proposals and redevelopments.

Soon after closure, a consortium including Alton Towers received planning approval for an indoor theme park, but work stopped in 1989 after two years when costs ballooned from £35m to £230m. That proposal was amended to a mix of offices, retail and a hotel in 1990, though no further work took place.

In 1993, the site and its outstanding debt of £70m was bought by Hong Kong-based Parkview International for £10m. Plans for a redevelopment, including a shopping mall, nightclubs, comedy venues and a cinema, were submitted for planning permission in 1997 with final consent coming in 2001. Amid fierce local opposition, the plan was never enacted.

One of the most extensive failed plans came after Real Estate Opportunities purchased the site for £400m in 2006. The £4bn plan included a London Underground extension, a biomass power station, a plastic eco-dome along with a mix of other more conventional developments. The scheme collapsed in 2011, with creditors putting the site into administration.

Chelsea Football Club was also rumoured to be considering a new 65,000-75,000 seat stadium on the power station site as early as 2008, though that scheme seemingly disappeared with the collapse of the REO plans in 2011.

In February 2012, architectural firm Farrells - led by Sir Terry Farrell - put forward a proposal to covert the power station into an urban park with the option to develop housing at a later date. The bid failed to win over the administrators.

The administrators announced in June 2012 that it had entered into an exclusive agreement with Malaysian developers SP Setia and Sime Darby, with completion of the deal taking place in September of that year. The redevelopment of the site was to use the master plan from the REO proposal, with a focus on luxury housing. The development continues.