Yesterday I visited the new Centrepoint development, located at the junction of Oxford Street and Tottenham Court Road.
It got me thinking about the “New Build Premium” attached to schemes such as this.
Prices for flats here are in excess of £3,000 per square foot. This number which has only relatively recently been achieved in the golden postcodes of Prime Central London, in areas such as Mayfair, Belgravia and Knightsbridge.
Now, Centrepoint is only a brisk 10 minute brisk from Mayfair. Indeed, views from the higher apartments here are directly over towards Mayfair and Marylebone.
However, the problem is that residential values in the immediately surrounding streets (where you can find residential property) are much much lower.
No doubt the benchmark for quality is drastically improved in schemes such as these with swimming pools, concierge services, underground parking etc. However, my view is that it’s a long way to fall when the newness has worn off and you have lost your new build premium (which many have estimated at 20%).
I believe values here have the potential to fall 20-30% in time to move more in line with property values in the immediate surrounds.
This is a mostly commercial area of London and you are surrounded by some quite-brutalist office buildings. Is it really going to become a new Mayfair, Belgravia or Marylebone over time? I have my doubts!
Up and coming areas take decades to become established even with massive infrastructure improvements such as Crossrail.
International buyers like liquidity in their property investments, which is the ability to get in and out of a scheme over a short period of time without losing money.
I worry that these new schemes in less than sought after postcodes will lock investors in for at least 10-15 years before values rise above what they are paying in the present marketplace.
Especially when you consider the associated costs of purchase such as stamp duty. This can easily add another 15-20% to a purchase price. Time will tell but I am advising my clients to be very careful when evaluating schemes such as Battersea Power Station, Television Studios in Shepherds Bush and definitely this Centrepoint scheme.