Canary Wharf's lofty office towers are set to be overshadowed by Europe's tallest residential building in the latest evidence of London's effervescent housing market.
Tom Ryan, an Irish property investor, intends to build a £1 billion, 74-storey skyscraper on the site he acquired for £100 million on Thursday in the business district to the east of the City of London. The tower will be 7 meters higher than Canary Wharf's tallest office building. The acquisition is the first in what sources say will be a series of UK property investments by Mr Ryan.
The scheme is the latest in a string of high-rise housing developments under construction across the capital, including the Heron in the City of London and One The Tower at St George's Wharf in Vauxhall.
The building fever has prompted Savills, one of the UK's leading estate agents, to warn that London faces an oversupply of high-value homes as developers rush to soak up the waves of foreign investment flowing into the capital's housing market. Four-fifth of purchasers of London's prime property are foreign and two-thirds of buyers are investors rather than owner-occupiers.
Mr Ryan still has some hurdles to overcome before he can start building. Though the site has planning permission for a 242-meter mixed-use scheme containing offices, a hotel and shops, he will have to ask Tower Hamlets Council to allow a housing development instead. Stuart Robinson, of property advisers CBRE, said it would be difficult for the council to turn down.
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The Hertsmere Tower will be priced as prime real estate – upwards of £1,000 per square foot – in an attempt to attract London's highest earners to abandon their traditional western haunts of Mayfair and Knightsbridge in favor of the eastern Docklands.
There will be space for 714 apartments covering more than half a million square feet, said Richard Berridge, chief operating officer of Ryan Corporation UK.
Mr Berridge shrugged off concerns of an overheated London housing market. "Some people might be overawed by the scale but we see an opportunity," he said. "Canary Wharf is one of the few places in the UK where you can build a tall building. It's time for a very good residential building of a very high standard; that is something that has been lacking there until now."
(Read more: UK may hit foreign property owners with new tax to bursthousing bubble)
Dominic Grace, a director at Savills, said the deal heralded "the arrival" of Canary Wharf as a prime residential destination. "The pendulum has swung in favor of east London, Canary Wharf is becoming the truly 21st century part of London because it's unencumbered by the small period properties prevalent in the rest of the capital; developers can create larger, more international-style buildings."
Hertsmere Tower will overtake Europe's current tallest residential building, the Sky Tower in Wroclaw, Poland, which is 212 meters tall. But it will not outstrip Europe's overall tallest building, The Shard at London Bridge, which is 308 meters and is primarily office, restaurant and hotel space.
Hertsmere is the first British scheme for Mr Ryan, who has invested in several other countries, Mr Berridge said. Ryan Corporation would not provide details of Mr Ryan's past developments.