Why a Developer Is Keeping Luxury Flats Empty On Purpose
The Centre Point apartments have been taken off the market and it tells you a lot about the housing crisis.
Centre Point (DBURKE / Alamy Stock Photo)
The London Mayor, Sadiq Khan, was elected on a promise to build 50,000 new homes every year he was in office. His electoral opponents promised the same. So does the Conservative government, the Labour opposition and the Liberal Democrats. This cross-party consensus extends to the public and the private spheres: "We must build more homes!" says everyone.
This alone should alert us to the fact that something more is at stake than the mere housing of London's citizens, which has always been far down the ladder of political priorities.
To build this housing, London has to attract investment – from the private sector, from offshore companies, from foreign investors, from overseas buyers. This means that a lot of the housing that gets built will be for market sale, and some of it will be the sort of multi-million-pound apartments that are completely beyond the reach of most Londoners. But, the argument goes, councils and developers can use this money from luxury apartment deals to build affordable housing.
Just one example of that out-of-reach housing is Centre Point Residences – which last week were taken off the market. Brexit jitters and tax rises meant that uncertain potential buyers were making "silly" offers that left the developer choking on its champagne. So they're simply not going to sell them, and they will stay empty for now.
Centre Point was built as speculative office space in 1966. In 2015, work began turning it into luxury flats by Almacantar, a property investment and development company part-owned by the Agnelli family of Italian billionaires. Founded in 2010, Almacantar has since acquired over 1.5 million square feet of prime property in central London, and is typical of the type of investor on which London's housing policies rely.
The first eight flats were sold off-plan that April. Since they have been taken off the market it's hard to establish what the sale prices were, but a two-bedroom flat was recently advertised for £3.665 million, and a three-bedroom flat sold for £7.675 million. Famously, the family of a Chinese student who'd come to study at University College London paid nearly £5 million for her two-bedroom flat. The two-storey penthouse, which is yet to be purchased, had an asking price of £55 million.
Although more than half of the 82 apartments have reportedly been sold, only ten of the owners have moved in to their properties. That the rest are buy-to-let landlords is reflected in the rental prices for the apartments, which are still available. One-bedroom flats are renting from £1,150 per week, two-bedroom flats for £1,890 per week and three-bedroom flats for £3,690 per week – plus a £25,500 deposit.
As part of its Section 106 agreements with the council, Almacantar also paid for the construction of 13 affordable housing units with 25 bedrooms. As has become normal practice in London, these are segregated from the rest of the apartments – not off-site, as is increasingly the case, but to the south end of Centre Point House. Despite their designation, only five of the flats are for social rent, with the other eight for "affordable rent" – which means up to 80 percent of market rate. Though the former may be affordable to the 5,500 people on Camden's housing list, the latter most certainly are not.
The prohibitive expense of eight of the development's affordable housing units is not the only point that raises the question of whether the largely empty super-prime developments that litter London’s skyline are doing anything to address the capital’s shortage of actually affordable housing.
As always, the viability assessment for the development on Camden council’s website has been redacted as "commercially sensitive", so we don't know how much the affordable housing component of the scheme set Almacantar back; but it can't have been much more than the price of that Chinese student's two-bedroom apartment. Still, by any measure, 13 units is a miserable return on the huge profits Almacantar can expect to make on the Centre Point buildings.
Across London, both councils and the Greater London Authority are handing over council land and granting planning permission to high-end developments that are little more than investment opportunities for global capital, and being tossed coppers in compensation.
The fact Almacantar can afford to take half the properties in Centre Point Tower off the market, having reportedly recovered the costs of its construction and renovation, shows not only the kind of stonking returns international developers are making on their investment in London property market, but how bad councils are at getting homes for social or even affordable rent out of these deals.
Until the UK market has stabilised sufficiently for investors to be sure of the returns on their capital, the 40 or so flats are likely to remain empty. But then, Almacantar can afford to leave them empty. There is as little incentive for them to sell their properties below the price foreign investors will pay as there is for property developers to build homes in which Londoners can afford to live. But the tens of thousands of homeless households in London can’t wait, and neither can the hundreds of thousands on the housing lists of London's councils.
Simon Elmer is a co-founder of Architects for Social Housing