London's Pink Floyd Madness
If any further confirmation were needed that something is completely nuts in the state of the global economy, a hitherto unglamorous piece of London just provided it.
Apartments in the redeveloped Battersea Power Station went on sale Jan. 9, and within five days people had put down reservation fees for 600 million pounds' ($964 million) worth of them, with a 10 percent deposit due within 21 days. That was 75 percent of the 800 apartments up for grabs, an unheard-of sale rate even during the boom years of the noughties.
And all in a city that's unhealthily reliant on an ailing financial sector and in an economy that's flirting with a triple-dip recession.
You'll probably remember Battersea's unlovely 1930s-era coal-fired power station from the cover of the Pink Floyd album "Animals.'' The massive red-brick block with four giant chimney stacks is undergoing an ambitious redevelopment, with all the restaurants, shops and movie theaters you would expect, plus its own subway station on a new extension to the London Underground. The apartments being bought are just floor plans at the moment. Completion is expected in 2016 to 2017.
Still, this is Battersea, not Kensington. That's why there were 40 acres available to redevelop. The asking price for the apartments is more than 1,000 pounds per square foot. Prices range from 338,000 pounds for a studio, to about 6 million pounds for a penthouse. The average price per square foot in Manhattan was $1,084 at the end of last year, according to the latest quarterly report from Douglas Elliman realtors.
Now the sales people are heading to Asia to sell remaining apartments -- apparently there are a lot of wealthy Chinese who like the idea of having a pied-a-terre, or whatever the Mandarin for that may be, in the Pink Floyd house.
London property prices have been performing a Wile E. Coyote running-past-the-cliff-edge stunt for several years now, especially anything that is expensive. There are plenty of reasons: a favourable tax regime for nondomiciled residents, impossible planning laws that ensure an undersupply of newly built housing, banker bonuses that still get paid, Russian and Chinese buyers, and the simple fact that the city has become one of the most cosmopolitan in the world. Many Italians, French and Greeks have bought London property since the crisis began just to secure their savings in a currency other than euros.
Still, you have to wonder how long any property market can keep rising on a crumbling economy. As Pink Floyd said: Money, it's a gas.
(Marc Champion is a member of the Bloomberg View editorial board. Follow him on Twitter. )