House prices: Bubble? What London bubble?
09-15-2014
Stephen Conway, the maverick developer behind Galliard Homes, on why he’s staying bullish about his home town
Anna White
By Anna White, Property correspondent
Stephen Conway surveys his empire from the top of his latest construction project, Baltimore Tower in Docklands, soon to be one of the tallest residential skyscrapers in London.
Born and bred in Bow, and estimated to be worth around £270m, the founder of Galliard Homes has developments scattered all over London, from upmarket apartments in Marylebone, to Great Scotland Yard hotel on Pall Mall. In two years Galliard will undertake a major project converting West Ham’s ground, Upton Park, into a mixed-use residential scheme when the Premiership club moves to the Olympic Stadium.
Conway, who left school at 16 and went to work as a banker for Mercantile Credit, has been on a £100m shopping spree this summer, buying up six sites in London which will deliver 380 new homes.
An industry maverick, he’s unperturbed by talk of a London property bubble, and has disregarded the strategic sale of prime London assets by companies such as Development Securities, which sold off £260m worth of UK assets and whose chief executive, Michael Marx, described the capital as “too hot”. Grosvenor Estates, the property group controlled by the Duke of Westminster, which owns swathes of mansion blocks in Belgravia and Mayfair, has also offloaded £240m of its portfolio, predicting that the London property market is starting to cool.
For Conway, 66, who resides in a penthouse apartment with his wife Hilary, overlooking Regent’s Park, opportunities still lie in London in both the high end and mainstream markets.
Yet this month a report from Beauchamp Estates warned that with 15,901 new homes in the pipeline in the Docklands, east London is in “danger” of oversupply.
Not according to Conway. After all, Baltimore Tower is almost 100pc sold off-plan (image below).
A block of 44 flats on Chiltern Street, Marylebone, is nearly sold, now priced at £3,000 a square foot. “There’s enough overseas and domestic demand to keep selling in London,” Conway says.
Of the Marylebone apartments, 35pc have been sold to domestic buyers, 35pc to Middle Eastern investors, 10pc Americans, 10pc Russians and 10pc from the rest of the world. “We saw a lot of Russian money coming into the UK at the beginning of the year and as there’s more turmoil [in the Crimea] Russians will worry about getting their money out and this will force up London prices.”
The punitive tax regimes of France and the US are also driving high net worth individuals across the Channel and Atlantic, respectively, he says.
Although he believes luxury London will continue to sell, he’s also expanding into the mainstream market.
Galliard Homes, one of the largest private developers in the country, with a portfolio worth £2.4bn, has bought five sites as part of its “getting on the ladder” campaign. Balfour House in Hounslow, under the Heathrow flight path, was a former Sri Lankan airlines headquarters, and will be transformed into 160 studio flats and small apartments.
Over the past three months Conway, who owns 100pc of the business, bought in Waterloo, Clapham and Camden and has also picked up the Old Crown Court building in Southwark, for an undisclosed sum, which will be converted into 50 units. “London is no longer affordable for people on normal wages. In fact, it never really was,” he says. “We’re buying in Lewisham, Waltham Cross, Clapham and Hounslow building £210,000 to £250,000 homes.”
This is still some way above the first-time buyer average in London which jumped 11.8pc to £159,804 in the year to July.
Conway thinks the trend of the baby boomer generation, having made 200pc appreciation on their homes since 1991, downsizing, and putting their children on the first rung of the property ladder, is set to continue. “They are earning nothing on their money on deposit, and despite low yields, property is still the best long-term bet for them,” he says.
The Hounslow site, in west London, takes him back to his earliest Galliard investments.
In 1992, as the UK was in the throes of recession, his newly formed company pounced on buildings such as the Government’s county hall, Shell’s Downstream building and bought the Butler’s Wharf estate out of receivership.
The business has tripled in size since 2000 and employs 400 staff full time, and 2,500 sub-contractors, with 35 developments under way across the South East and 3,783 homes in the pipeline.
His founding principles explain Galliard’s survival through several downturns. “The problems in property are the same as problems in Monopoly,” he says. “Keep liquidity and don’t buy too much stock.”
After the 2007-08 housing market crash he had squirrelled away a war chest which he used to buy land when prices plummeted. Conway also favours hotel developments, selling the £10,000-a-night Great Scotland Yard hotel on Pall Mall, which is being converted.
“It’s easier to get planning permission on hotels,” he says, despite the fact the UK has a chronic housing shortage.
But not everything the self-confessed deals junkie touches turns to gold. He converted a handful of London buses into mobile apartments, but couldn’t sell them. A fleet of second-hand limousines followed, but Conway and his eight-strong board of directors got nothing more from the investment than a ride across town. “I’ve been in the developments business for a long time and it can be a sausage machine,” he says, “I get a bit bored sometimes.”
He has more faith in his latest investment. He’s joined forces with the model, David Gandy, to back the start-up Wheyhey ice cream.
Despite his bullish outlook on London, Conway admits that housebuilding costs will rise with a lack of materials and bricklayers — a hangover from the recession.
And while his summer purchases suggest his heart keeps him building in London, the horse racing fanatic, a regular at hedging his bets. “We’re also looking further into the commuter belt,” he says.
