London Calling: Pt 2

THIS column last week discussed the upward trend of Malaysians buying residences in London. It concluded from the steady flow of London property launches in KL that the trend will persist as long as the exchange rate remains beneficial. In fact, the probability of a surge is feasible.

Certainly, the rise in the number of local property developers venturing into London will encourage an upswing.

The Battersea Power Station project is a prime example. It received more than favourable response from Malaysians. Prime Minister Datuk Najib Tun Razak announced soon after the project launch that all the apartments in Phase 1 allocated for Malaysians, had been taken up.

The development by Malaysian Consortium, led by property developer SP Setia Berhad, Sime Darby Bhd and the Employees Provident Fund (EPF), is the biggest undertaking by a Malaysian company in London so far, arriving at a gross development value of £8 billion (RM38 billion).

Developers' interest in London

Besides the favoured bucked-up ringgit to sterling exchange rate, the appeal of London to a property developer lies in its status as a prime real estate destination.

With a customer base comprising primarily of buyers from Malaysia, Singapore, Hong Kong and increasingly so China, property developer Eastern & Oriental Berhad (E&O) sees London as leverage.

Datuk Terry Tham Ka Hon, managing director of E&O recounts a 2012 Jones Lang La Salle report which revealed "that buyers from these markets made up 51 per cent of new property purchases in central London that the broker handled, up from 47 per cent the year earlier.

More recently, a 2013 CB Richard Ellis (CBRE) report cited that 38 per cent of demand for London residential property is dominated by South East Asians."

Given Malaysia's colonial history, general similarities in the legal system, also makes London a fairly friendly market to enter for local property developers. For E&O, it was a low risk entry into the London property market too, with the acquiring of Princes House.

As a prime freehold building, not only did it provide an immediate avenue for leasing to generate rental income, it also provided a potential upside by offering opportunity for substantial refurbishment or conversion.

"Most importantly for us, Princes House being a conversion project means that we can expect a managed and more efficient turnaround as opposed to building something from scratch," Datuk Tham expounds.

Making its mark

With the Battersea Power Station one of the fastest selling developments in London in recent years (according to its CEO Rob Tincknell) and the subsequent maiden projects by our local property developers similarly receiving positive response, this suggests international acceptance.

Prominent local property developer IJM Land which unveiled its maiden project, the Royal Mint Gardens – a 2.7 acre mixed development located within a few minutes' walk to London's iconic landmarks such as Tower Bridge and Tower of London – reported a pre-launch take up of 40 per cent by London buyers.

At the media briefing, Datuk Soam Heng Choon, CEO and managing director of IJM Land was confident of its success, estimating that 70 per cent would be taken up by the first launch.

The update from the COO and CFO of IJM Land, Edward Chong: "The take-up for Royal Mint Gardens exceeded 75% from its launch in KL and London." The mixed development project worth £300 million (RM1.5 billion) includes a five-star hotel, apartments and retail space.

An observation made by a financial daily on launches by Malaysian developers in London reported that these "come with more integrated offerings."

Battersea comprises of apartments, boutique retail space, offices, hotels, theatres and restaurants. Princes House has successfully obtained planning permission from the authorities to convert the property to commercial and residential use.

It will comprise 34 units of E&O branded serviced apartments and 20 residential units.

"Properties in Malaysia, developed by our very own local developers, are well-sought after by discerning foreign buyers. As they venture into markets like London, Malaysian property developers bring with them their expertise and experience in delivering top-notch properties of a wide scale, from boutique to medium and even large-scale master planned developments," shares Datuk Tham.

It is also evident that Malaysia is contributing to the economy in more ways than one. When Malaysian developers enter London, they take their customer base with them. In the case of E&O, their existing clientele of high-net worth individuals come from across the globe.

These include top buyer markets like China, Singapore and Hong Kong, not forgetting Malaysia.

More to come

Other than the property developers mentioned above, Amcorp Properties Bhd, Oriental Holdings Bhd, as well as privately-owned AlloyMtd Group also has invested in property projects in London.

AlloyMtd Group acquired One Crown Place located in a borough in London called Hackney. It has received all concessions for a 24-storey office tower, a hotel and retail space.

Datuk Soam also indicated that IJM Land have been approached for "joint ventures from a few London parties for mix development projects." And word has it that SP Setia is among other property players looking at additional opportunities to expand in London.

Conclusively, the success of these maiden projects will pave the way for more ventures in London.