- The Edge Singapore reported that demand for properties in central London continues to be on an upward ascendancy. Against a relative lack of new supply over the last two decades, incremental demand for prime London spaces has received an added kick from the rising influx of foreign buyers. According to a survey by LSL Property Services Plc/Academetrics, prices in the central London area have risen by an average annual growth rate of ~7.9% in tandem with growing demand.

- Consider the ultra luxury One Hyde Park apartments; total sales have reached £2.8bil (average pricing: £6,000psf to £7,000psf) with only one unit left unsold to-date. Indeed, our channel checks indicate that demand for prime areas within Central London remains strong even at average prices of between £2,000psf-£4,000psf.

- Two projects were launched at prime Central London during the weekend of July 21 and 22:

- The Chilterns: 44 contemporary-styled apartments within the fashionable area of Baker Street/Marylebone High

Street, and close to Oxford Street. Prices start from £3,000psf (two-bedroom - from £3mil; three-bedroom – just under £4mil).

- Four townhouses in the Primerose Hill neighbourhood: Three out of the four were sold during its launch in Singapore at prices from $2mil to $2.5mil (average: £950psf). According to Saffron International, properties within Primerose Hill have historically enjoyed a 10% increase in capital values p.a.

- We understand that the lack of supply has been a key driver underpinning the continual appeal of London properties. Based on the Census 2011 data, the Department of Communities and Local Government estimates that new households in London are expected to surge nearly 40% between 2011 and 2021. Nevertheless, out of the 525,790 units being lined up – only 277,240 units would be available over the next decade. This leaves a shortfall in new homes of ~48% in the prime areas, based on statistics by Knight Frank.

- Further supporting this view is the still-strong rental demand within prime central London. Property search and acquisition consultancy company Black Brick opines that the appetite for sub-£1mil one to two-bedroom units is still fertile, particularly for those within the 27 to 35 age bracket. As access to mortgage financing is still somewhat difficult to obtain in the UK, these sub-group normally resort to rent as often time – they are unable to fork out the higher deposits required to purchase a home.

- The upward movement in prime London property market prices bodes well for select Malaysian property developers with exposure to this region. Notably, Phase 2 of the Battlesea Power Station re-development project (40:40:20 JV between SP Setia, Sime Darby and EPF) is already on the cards after achieving ~97% take-up rate for Phase 1 in just six months from its debut launch in January. The indicative pricing for Phase 1 (GDV: £900mil/ ~RM4.5bil) – Circus West - was reportedly set between ~£900psf and £1,300psf. The studio units were priced from RM1.6mil (~£338k); onebedroom – RM2mil (~£423k); two-bedroom – RM2.9mil (~£613k) and three bed-room – RM4.3mil (~£894k).

- Other upcoming launches by Malaysia property developers in London include:

- IJM Land’s 51%-owned Tower Bridge project (GDV: £300mil or RM1.5bil): It was reported that the maiden launch for this integrated development along Royal Mint Street could kick-off by year-end, with an indicative pricing of ~£1,000psf to £1,300psf on a total gross built-up area of approximately 650k sq ft. When completed, the project would have an excellent view of popular London landmarks such as the Tower of London, Tower Bridge, Royal Mint Court, St.Katherine’s Docks and River Thames.

- E&O’s Princes House Apartments (GDV: RM250mil): As reported in The Star, the project forms part of ~RM2.2bil worth of projects that E&O is set to launch within the next one year. Comprising of 60 to 80 apartments at indicative prices of over £1,000psf, Princes House is strategically located close to a number of leading academic institutions in London – including the London School of Economics (LSE).

- Broadly, most investors who are looking for properties in London also harbour plans to send their children for tertiary education within the area- Malaysians notwithstanding. Not surprisingly, roughly one-third of the buyers of One Hyde Park are believed to be Asians, we understand.

- But unlike boutique schemes that are sold off-market with far fewer units (<60 units), we observe that recent and upcoming maiden launches by Malaysian developers in London come with higher density with more integrated offerings. Secondly, the absolute prices of these units are within the more affordable range at below £1mil – where demand remains fairly robust as indicated earlier.

- More importantly, the strong response received by Phase 1 of the Battlesea project sets a solid foundation for other upcoming launches by their fellow Malaysian peers in London – further augmenting the robust pre-sales momentum for domestic projects post the 13th General Election.

- For exposure to the London property market, we like IJM Land (BUY; FV=RM3.80/share) ahead of the scheduled launch of its Tower Bridge project by year-end. Our other top property picks are Mah Sing Group (BUY: FV: RM3.70) and UEM Land (BUY; FV=RM3.61/share).

Source: AmeSecurities