Grosvenor reveals property bubble fears
Housing group Grosvenor has announced it is to step back from the London market amid fears that a bubble may be emerging in luxury developments.The firm, which is owned by the Duke of Westminster and his family, has slashed its development pipeline by £240 million and sold off a number of high-end assets, its annual report revealed.Profits from revenues doubled year-on-year to £175.1 million, while the company's pre-tax profit increased 38 per cent to £506.9 million. Total return on investment in the firm's UK division grew to 16.5 per cent.The firm says it is confident about its core London business but has reduced its exposure to super-prime development in the capital. Instead, it is focusing current investment on diversifying into the domestic mid-market rental sector in the capital.Mark Preston, group chief executive, hailed an "excellent year" for the group but said: “We have been concerned about the level of property values in some markets, particularly in prime central London residential property.”Grosvenor finance director Nicholas Scarles said in the company’s annual financial statement: "There is 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."In January, fears that a bubble may be developing in the capital's housing market were raised by the Ernst and Young ITEM Club, which said the average price of a home in the nation's capital could reach £600,000 by 2018.It said the Bank of England's (BoE) Monetary Policy Committee could take action to prevent the market from overheating, for example by imposing a formal limit on income multiples.However, the BoE has ruled out intervening in the London market as it says many properties are being purchased by cash buyers and it does not have the policy tools at its disposal that would affect such transactions.
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