Even Versace Can’t Lure Homebuyers to Damac’s London Tower

Since announcing plans to bring a little bling to an overlooked corner of south London, Dubai-based DAMAC Properties PJSC has outfitted its extravagant Damac Tower with Versace interiors and all the flair one might expect from a developer that’s partnered with Donald Trump on luxury golf courses. There’s only one problem: not enough people are buying.

(Bloomberg) — Since announcing plans to bring a little bling to an overlooked corner of south London, Dubai-based DAMAC Properties PJSC has outfitted its extravagant Damac Tower with Versace interiors and all the flair one might expect from a developer that’s partnered with Donald Trump on luxury golf courses. There’s only one problem: not enough people are buying. 

A number of the flats in Damac Tower remain vacant, while buyers have flocked to less-ostentatious – and more affordable — options on offer in the Vauxhall Nine Elms area from British and Irish developers. Other foreign builders that have rushed to capitalize on the former industrial area have seen similarly low sales numbers. 

Part of the problem is that the type of buyer who would typically be enticed by the tower’s flashy interiors wants to live in a more affluent area than Nine Elms, according to one broker. “The tower and Versace offering would be ideal for Knightsbridge or Mayfair, but perhaps Vauxhall was just a step too far,” said Peter Wetherell, founder of London estate agent Wetherell. “It is perhaps a case of a fabulous luxury brand, but in the wrong location south of the Thames,” he added, emphasizing the importance of knowing your audience when it comes to big real estate bets.  

Between about 55% to 70% of flats in Damac Tower were sold as of this month, according to data compiled by Molior London and seen by Bloomberg News, leaving at least 30% empty. The 50-story block saw several deals dissipate toward the end of last year, the data shows, at a time when mortgage rates were spiraling to 14-year highs. 

Damac told Bloomberg that about 70% of units in the tower have been sold, but did not specify when this number was calculated.

London’s Nine Elms district, which snakes along the south bank of the city’s River Thames and is home to the iconic Battersea Power Station, is currently undergoing a major transformation. Thousands of small, premium-priced apartments are being developed in the neighborhood’s tower blocks. Long-established London homebuilder Bellway Plc priced apartments in its new Lexington Gardens development with an average asking price of about £1,000 ($1,280.3) per square foot, according to Molior — just under half the average cost per square foot at Damac Tower.

That bet has paid off. Bellway sold every flat in Lexington Gardens within months of completing the development last year. Down the road, Ballymore Properties’ upmarket Embassy Gardens development — which features a swimming pool suspended between two of its three buildings — is already 90% full since its second phase was finished. 

The success of these projects showcase the limits of Damac’s approach. “While Versace is a highly valued brand in the Middle East, it holds far less sway with British, European and American buyers,” said Jo Eccles, managing director at buying agent Eccord. “It’s risky to limit your target market, especially in a tougher economic climate.”

The Nine Elms area has a troubled history for overseas developers. Chinese firm Guangzhou R&F Properties Co. caused a stir last year when construction workers at its flagship development, One Nine Elms, complained about not being paid following cash disputes between the company and the site’s main contractor. Months later, the firm’s co-founder was confined to one of the tower’s penthouse apartments as a bail condition for bribery charges.  

While Molior data shows that nearly 300 of the planned 437 One Nine Elms homes were sold between 2014 and 2019 — a period that overlapped with the building’s sale by former owner Dalian Wanda Group Co. — construction delays mean that many of these contracts have likely expired, giving buyers the opportunity to retrieve their deposits. 

R&F told Bloomberg it could not provide transactions data for the building because “sales have not started.” The company claims zero homes were sold in advance of this month.

As for Damac — a company known for developing Donald Trump-branded golf courses in Dubai — slow sales are likely being made worse by an exodus of investors from London’s presale market. Higher tax burdens and the threat of new policies that would limit purchases by overseas investors might also be weighing on demand for high-end real estate.

“Investors who traditionally made up the bulk of off-plan buyers tend to be heavily led by market sentiment,” said David Fell, a senior analyst at Hamptons. “The 3% stamp duty surcharge has weighed on investor numbers right across the country,” he added, referring to a property tax targeting landlords and owners with more than one property.

 

Still, a spokesperson for Damac said “the steady pace of sales has been encouraging,” and that the company was “happy” with the interest shown in the empty apartments.

Damac may also take some comfort in the fact that London’s most expensive homes are defying a wider slowdown in the city’s property market. Agreed sales for homes priced at £5 million or more were 26% higher in April than a year ago, according to researcher LonRes.

But £5 million is still less than half of the asking price for one of Damac’s five-bedroom apartments, meaning brokers could be in for a long slog. 

“The tower will be a long-term success story,” Wetherell asserted. “But because of the disconnect in location association, it may take more concerted marketing.”

–With assistance from Jack Sidders and Zainab Fattah.

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