Scott Reid: The £140m unused unfurnished flat

Unfurnished flat in the city's One Hyde Park development for �140m. Picture: Reuters
Unfurnished flat in the city's One Hyde Park development for �140m. Picture: Reuters
Share this article
Have your say

There is nothing cool about a £140m unfurnished flat writes Scott Reid

Eyebrows will have been raised after London’s soaring property market hit new heights last week with a record £140 million being paid for an unfurnished flat in the city’s One Hyde Park development.

It’s an astonishing amount of cash, even for a penthouse that stretches to a cavernous 16,000 square feet.

Prime central London house prices have risen 80 per cent in five years, with Savills calculating that ten London boroughs now have an aggregate property value equivalent to the total value of Scotland, Wales and Northern Ireland combined.

London has always seen extremes but signs of a bubble are brewing elsewhere. The Nationwide building society’s latest data showed that annual house price growth is back in double-digit territory for the first time in four years.

Scotland’s housing market may be less heated, with average gains in the lower single digits, but there are areas which echo the south east of England – most notably around Aberdeen where many aspiring first-time buyers will find themselves locked into renting for the foreseeable future.

Further evidence of the strength of the property rebound came on Friday with the closely-followed purchasing managers’ index revealing that the pace of expansion in housebuilding was close to the fastest for a decade.

It’s good news and relative boom times for an industry that was dragged to its knees by the credit crisis. Hundreds of building firms went to the wall along with tens of thousands of jobs. Any reversal of fortunes must be welcome.

It is also clear that there is little of the lending excess seen at the peak of the last boom – no 100 per cent-plus mortgages on ridiculous multiples of earnings. The number crunchers at analyst Hometrack calculate that home buyers are now paying nearly 97 per cent of the asking price of a property – the highest average figure in nearly 12 years.

Yet fears that an already nicely warmed up market may become too hot to handle remain.

Research this weekend suggests that the UK government’s flagship Help to Buy loan scheme could generate a whopping £4.5 billion for Treasury coffers over the next few years.

The Bank of England is acutely aware of the danger posed by spiralling property prices, making the issue “the very brightest [hazard] light” on its dashboard. Its deputy-governor for financial stability, Sir Jon Cunliffe, may be stating the obvious when he highlights the precedent in the UK for periods of a rapidly growing housing market to end in “negative equity and an overhang of debt for many households”.

The London market may indeed be exceptional, with vast amounts of foreign investment pouring in, but that is no reason to become complacent. The central bank must stay on red alert and if necessary act decisively to cool the market.

Soames to the rescue at Serco

RUPERT Soames has had a baptism of fire in his new role as boss of outsourcer Serco. A string of shock after-market announcements last week laid bare the challenges facing the former Aggreko chief executive.

Soames spent Thursday – his first official day in charge – going cap in hand to City investors to raise emergency funds, with success. It followed news of a sharp adjustment to the group’s profits guidance and the exit of its long-standing finance director Andrew Jenner.

Serco’s troubles stem from a scandal-hit 2013, during which it was found to have overcharged the UK government on a key contract to tag criminals. Its new boss now plans to step up an ongoing strategy review in order to restore the firm’s credibility.

There was some fighting talk on day one in the job as Soames pledged to reverse the “severe damage” caused by the contract debacle and put “a spring in the step” of staff. A similarly exhaustive strategy review – launched when he became the head of Aggreko more than a decade ago – led to a hugely successful run for the temporary power supplier.

The City has expressed concern that with the Serco probe set to take nine months to complete, the market may have to wait until full-year numbers are presented next March for a clear indication on the turnaround story.

I doubt Soames will keep investors in the dark for that long. Expect this highly regarded grandson of Winston Churchill to grab Serco by the scruff of the neck.

Wolfson swoop

IT LOOKS almost certain that Scotland will lose another listed company after the £290 million swoop on Wolfson Microelectronics.

The deal appears attractive for investors in the Edinburgh-based chip maker, given the firm’s rocky ride as a quoted concern. US suitor Cirrus Logic gets its hands on hundreds of patents and considerable R&D expertise, but has given assurances that it plans to retain a sizeable engineering base in the city.

Some will bemoan the dilution of Scotland’s pool of listed companies, though it’s not all one-way traffic – Exova, the Edinburgh-based material testings firm, recently floated with a value of £550m. More vexing is the tendency for UK tech businesses to attain a certain size then sell out. «

Twitter: @scottjamesreid