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Luxury home boom to change face of London

Wednesday - 1/29/2014, 2:40pm  ET

DANICA KIRKA
Associated Press

LONDON (AP) -- The face of London is about to change.

Dozens of buildings of 20 stories or more are under construction or planned along the south bank of the River Thames just upstream from Big Ben and the majestic dome of St. Paul's Cathedral. The development surge, fueled by wealthy foreigners looking for a safe place to invest, has spawned concern that the city is sacrificing its heritage for the sake of luxury homes.

"London is in danger of becoming a sort of Abu Dhabi, a sort of Hong Kong," warned Nigel Barker of English Heritage, a body devoted to protecting the nation's inheritance.

LONDON GROWS UP

It's not that London lacks distinctive tall buildings: the 87-story Shard stabs the sky south of London Bridge, the 41-story Gherkin rises above the financial district, and soon there will be the 38-story Walkie Talkie, all of which earned their nicknames because of their unique shapes.

But critics are concerned about the sheer number of new projects -- some 200 in various stages of consideration or construction, according to New London Architecture, an independent group studying development. Many of them are residential properties clustered along the south side of the Thames with views of the water and the architectural treasures across the river.

Unease about tall buildings in this city, which prides itself in having risen from the ashes of the Great Fire in 1666, isn't new. Architectural purists like Prince Charles, the heir to the throne, have long warned against skyscrapers.

But economic forces following the 2008 economic crisis have rekindled the conflict between development and conservation. While the government seeks to rein in the financial services industry, London continues to attract foreign money and wealthy expatriates, straining the city's Victorian-era infrastructure and widening the wealth gap.

The independent Smith Institute estimated in 2012 that investment in luxury homes was 5 billion pounds ($8.3 billion) a year. In the two years through June 2013, foreign nationals bought 69 percent of the newly built homes that sold for more than 1 million pounds in central London, according to an October report by Knight Frank, a London property adviser.

"It is a honeypot for global capital," said Peter Murray, chairman of New London Architecture. "So we're seeing pressures we've never experienced before. The movement of global capital is having a dramatic effect on how we plan the city."

ROOMS WITH A VIEW

As governments poured money into banks to save them during the financial crisis, rich people around the world sought safe places to park their money. Investors flocked to London because of the stability of Britain's government, the city's vibrancy and its tolerance for newcomers.

"We didn't know that the U.K. in general, and London in particular, would be seen as a safe haven for people all over the world," said Tony Travers, an expert on issues facing the capital at the London School of Economics. "Property in London was treated as an asset class that was safer than say, banks in Cyprus."

From 2007, just before the crisis, to October 2013, house prices in London's most desirable neighborhoods rose sharply. In Kensington & Chelsea, home to Kensington Palace and Notting Hill, average prices rose 42 percent to 1.2 million pounds, according to the Smith Institute. In the City of Westminster, which hosts the Houses of Parliament, prices jumped 43 percent to 863,000 pounds.

Prices for newly built homes on the south bank of the river are even higher. A four-bedroom, 6,600 square-foot apartment in the 50-story Tower at St. George Wharf is being offered for 19.5 million pounds.

THE PLACE TO BE

The boom is also a reflection of London's attractiveness as one of the world's most cosmopolitan cities. With a population of 8.2 million, London boasts not just people from all corners of the former Empire, but everywhere else, too. There are more French citizens living in London, for example, than in Bordeaux. Then there are some 250,000 Americans.

Demand for housing has spurred development, with a dozen construction cranes jutting into the sky along the south bank of the river west of Westminster Bridge. The work is part of a 15 billion-pound collection of projects known as Nine Elms, which promoters say will create 16,000 new homes, 25,000 jobs and an "internationally significant business district" in the boroughs of Lambeth and Wandsworth.

Deputy mayor for planning Edward Lister says there's a strategic approach to protecting the city's skyline, with detailed policies making sure the right buildings are in the right place.

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