A recent land sale in the UK’s capital city has indicated to Simon Morris that the lucrative London property development market could be going underground.
There’s never been a better time to build property in London. The UK capital has seen house prices increase substantially and commercial investment volumes reach new heights in 2015. Also as Simon Morris previously reported, the city’s rental growth outstripped that of the rest of the UK’s in the third quarter of 2015.
This indicates that investors can draw significant return on investment by purchasing land that they can develop in the UK capital. Buyers are going to increasing lengths to secure land; for instance a dilapidated shed in Peckham sold for a million pound recently, after it was engulfed in a bidding war.
The Telegraph has reported that buyers are now purchasing land under London to develop as well. Apparently a “mystery buyer” recently paid £150,000 for the ground that lies underneath Queen Court, a 1930s apartment block in Queen Square, Bloomsbury, central London.
This 1,975 square foot plot of ground was sold at auction as an “unexcavated basement space” with the freeholder’s consent to develop. Despite the fact that it was sold without approved planning permissioned, the plot went for £30,000 more than the reserve price at auction.
Simon Morris on Development potential
Chris Coleman-Smith, head of Savills auctions, who sold the Bloomsbury plot commented: “You hear about people digging beneath their mansions, so why not on something a bit different. With a shortage of space in London it makes sense. This unexcavated basement sparked the imagination of bidders, attracted to its scope for potential development and location in a vibrant enclave of central London.”
Coleman-Smith makes a valid point – the average value of residential stock in Bloomsbury has climbed 15.8% – to £768,669 – in the past year. Furthermore property prices in the area apartments in the block, which is located near Great Ormond Street Hospital, cost roughly £650,000; suggesting that this unnamed buyer could reap significant return on investment.
He went on to say: “Bloomsbury has already benefited from the substantial regeneration of neighbouring King’s Cross, with further gains possible once the final works are complete in 2020. Even if the buyer chooses to do nothing with the land, there is still good potential for further capital growth.”
Transforming London property development
This really shows how the UK capital’s chronic shortage of residential property stock and land is transforming London property development. The city is one of the most desirable living locations in the world, so developers can go underground safe in the knowledge that they’ll attract buyers and renters who are desperate to live in London.
Read more on Property Development & Investment on the Simon Morris Blog.