There are a lot of opinions and views on what areas to invest in and what areas are hot or will be hot next year. I prefer to look at why certain areas could outperform the market average and what kind of investments to look for in those areas.
Historically market growth above beyond the norm was driven by two main factors, 1. Restricted Supply and 2. Regeneration & Infrastructure improvements.
Where do we find the places that offer these two key elements when looking at locations across London?
There are masses of research showing that the population of London is growing, and growing fast, housing, in general, is in short supply, however, this is not the case across all price bands. I will repeat what I have mentioned previously, the highest demand lies in the lowest price bands. This is further aided by help to buy and first-time buyer scheme in the sub £600k price range.
The development pipeline and current market activity suggest that the market for properties above £1m is well catered for and there does not appear to be any signs of under-supply.
My focus, for now, would be in the price range £600k and below.
Regeneration & Infrastructure improvements:
Various levels of infrastructure improvements are taking place across London. Historically these have proven of significant benefit to property values. Most recently we have witnessed the first two iterations of the so-called "Crossrail effect" in the areas immediately surrounding stations, first, it was when the confirmations were given, then it was when construction of stations started taking place. These areas have outperformed their wider surround areas by significant percentages. Reports showed figures of 82% vs 30% for immediate areas in some instances vs wider areas.
Thankfully historic data would show that this is potentially not over. If we look at the extension of the Jubilee line, there was further growth after the completion. That sense of something happening compared to people talking about it happening has the great effect. Similar results have been seen in King Cross with the regeneration in that area bringing a lot of new facilities and improvements to the area as well as new stock type. Properties in the surrounding area have performed incredibly well over the last 5 years when compared to wider market averages.
Where does this leave us with looking for areas to investment in? A few examples would be areas on the cusp of large regeneration, not right in it as good prices are likely much harder to find. The areas around Crossrail Stations that have not yet performed as well as others and are still in need for further improvements.
Some areas of interest and parts of town that I am excited about seeing where it can expand and grow to both residentially and commercially is 1. Hayes and 2. Silvertown.
In Hayes, few developers have been bringing great projects to live in the area, Crossrail is due to open with a 5-min ride to Heathrow and only 34 mins to Canary Wharf. Several businesses in the area serve Heathrow and others are placed here for the proximity to the airport which will be further improved by Crossrail. Areas immediately surrounding these developments offer the incredible opportunity for smaller projects to thrive and offer great potential for value uplift and a strong rental demand. There is also the additional prospect of the Heathrow additional runway which could add to long-term growth.
In Silvertown, large scale regeneration is at the forefront of changing the area so significantly that should you stop by in a few years you would barely recognise it. There are two major projects underway, Royal Wharf & Silvertown Quays both bringing over 3,000 residential units each and significant commercial space as well. The area already has the great infrastructure with the DLR and City of London Airport, the addition of Crossrail will just further enhance it. A 10-min ride to Liverpool Street and just 45 mins to Heathrow.
We are in interesting times in the London market, finding great investments is all about the fundamentals.
Have a wonderful festive season, Merry Christmas & Happy New Year to all.
--- Note: Median household income in London was last reported at £39,100 meaning that half of London’s households could only purchase a home with a maximum mortgage in the region of £170,000 ---
By Rian Strauss, Founder Strauss Realty