Grosvenor Cuts Luxury-Home Investment on London Bubble RiskPatrick Gower
Grosvenor Group Ltd., one of the biggest central London property owners, reduced investment in luxury-housing development by 240 million pounds ($404 million) last year on concern that values are too high.
“We have been concerned about the level of property values in some markets, particularly in prime central London,” Chief Executive Officer Mark Preston said in a statement today. The company, owned by Duke of Westminster Gerald Grosvenor’s family trusts, is instead “exploring the mid-market, where there is unsatisfied demand for good-quality rental housing.”
Property values in London’s best areas have jumped more than 60 percent since 2009 as political and economic turmoil overseas attracted cash-rich buyers and foreign investors seeking a haven, according to Knight Frank LLP. Price growth is slowing as buyers resist rising asking prices, Tom Bill, an associate at the London-based broker, said by phone.
Grosvenor Finance Director Nicholas Scarles said there’s a risk that “a bubble is developing.”
“We do not know when a correction will occur, but our own analysis indicates the prospect of a correction is becoming more likely,” Scarles said in the company’s e-mailed statement.
Grosvenor, whose assets include 300 acres (121 hectares) in London’s Mayfair and Belgravia neighborhoods, said pretax profit excluding changes in investment property values and one-time items more than doubled last year to 175.1 million pounds, largely on sales in London, according to the statement. This year’s figure will probably be less than 100 million pounds, Preston said in the statement.
The total return on real estate, which combines changes in property values and rental income, increased to 9.7 percent for 2013 from 7.2 percent a year earlier, the company said.
Gerald Grosvenor, the wealthiest U.K. citizen, has a net worth of $13.2 billion and is the world’s 81st richest person, according to the Bloomberg Billionaires Index.