London : Property is Games’ first winner

The Sunday Times – Property
http://www.timesonline.co.uk/article/0,,2098-1683609,00.html

The Sunday Times | July 10, 2005

London : Property is Games’ first winner
The capital’s estate agents are in the mood to celebrate the Olympic bid, as demand for flats in Stratford surges and the whole city looks set for a market boost, says Karen Robinson.

The jubilation at last week’s announcement that London will host the 2012 summer Olympic Games was led by politicians and sportspeople. But long before any athletes strive for medals, the Olympic bid had its first winners — buyers who had the foresight to invest in property in Stratford, east London, where most of the events will take place.

The Olympic dream had already caused the local property market to outperform the rest of the country. “The bid put Stratford and east London on the map,” says Barbara Goldsmith of Stratford Properties, a property consultancy, who started investing there about five years ago. “And over the past few years property prices have been rising way ahead of the national trend, reaching 40% annual increases. Over the past year it has settled and slowed, along with the rest of the country — but now my phone is ringing non-stop with people looking to invest.”

Regeneration in Stratford, part of Newham, the country’s third most deprived borough, is now underway, and by 2012 there will be 10 train and Tube lines, including a seven-minute shuttle from St Pancras, within walking distance of the Olympic Park now taking shape on a derelict brownfield site. As well as the legacy of the Olympic facilities — the athletes’ village will be turned into affordable housing — the Stratford City project, now under construction, will create a shopping centre, 5m sq ft of commercial premises and 4,500 new homes, 30% for key workers and social renters.

Eddie Maddox, a bank manager from Billericay, Essex, bought a one-bedroom flat at The Mill, a new Barratt development, for £190,000 in 2004, attracted by the regeneration plans. The last time he had it valued it had already increased to £212,000, and he says that, thanks to the success of the bid, “I would have thought it has made another few per cent.” And while finding tenants has not been a problem so far, he is confident that as work for the Games gets underway, there’ll be no shortage of people renting in the area.

Barratt’s Stratford Square development close to the town centre has one-bedroom flats with balconies from £217,000 and two-bed, two-bath units from £282,995. Developer Bellway has apartments for sale in The Lock in Blaker Road, near the Pudding Mill Lane DLR station, where one-bedroom flats start at £205,000 and two-bedders at £260,000.

You can still get a one-bedroom flat in the area for £125,000, according to Mohammed Bangladesh of Senator Estates, a local agency, but such properties will not stick around for long. Within minutes of the bid announcement, he says, “I got a couple of calls. They didn’t want to bargain, they wanted to go with the asking price.”

Clive Fenton, southern chairman of Barratt, says: “Even without the Olympics, property observers have for several years flagged Stratford as an up-and- coming place, not least because it sits neatly between Docklands in the south and the City to the west. It has become the public transport hub of the eastern half of Greater London, with mainline, Tube, DLR and a bus network centred on Stratford. And shortly it’s going to get a Eurostar stop. These things — along with the success of Canary Wharf and Docklands — have shifted London’s centre of gravity to the east.”

And it’s not just the Stratford area that will benefit, if past Olympic-city performance is anything to go by. The last four hosts — Athens, Sydney, Atlanta and Barcelona — all saw property prices outperform their national markets in the five years leading up to the Games, most impressively in Barcelona where prices increased 49% more than in the rest of Spain. In Sydney the differential was 11%, Athens 9% and Atlanta 6%. Even the 2002 Commonwealth Games in Manchester were preceded by a 102% price increase over five years, compared with 83% nationally.

Geoff Marsh of London Property Research sees the Olympic effect spreading throughout the capital. “It’s difficult to see anything other than a massive boost to confidence in the residential market. Confidence is the one ingredient missing in the London market at present. We could have a ‘golden scenario’, in which the Olympics bring private investors back to the market and institutions join the fun, through pensions and investment trusts. Employment will grow faster than was already happening, and interest rates do now look set to trend down, certainly not up. And,” he adds, “ London’s ‘ World City’ image will be enhanced, which is essential for the lettings market.

“The improved infrastructure spend will provide a short- and long-term boost to the locations which benefit most,” Marsh says. He divides the areas into “short-term winners”, which are the obvious beneficiaries in terms of proximity to the main Stratford/Lower Lea Valley sites, and the “quiet” winners.

The short-term winners, along with Stratford, he says, will include Bow, which is in the throes of a huge redevelopment programme, replacing failed council estates with mixed- tenure developments. “Bow is still very competitively priced for inner London. And Canning Town, still a dump, where development has been very limited.”

The main “quiet winners” look likely to be “locations on the North London line, which is a surprisingly useful service, albeit dirty and dilapidated, linking into Stratford from east (North Woolwich) and west ( Richmond, Camden Town). Hackney, Dalston and Hoxton are particularly well set. They will benefit hugely from the East London line extension.

“Other slightly more distant locations in the Thames Gateway, such as Barking and Purfleet, will become more plausible as locations for very large-scale development and regeneration than they currently are.”

But, warns Marsh, the coming of the Olympics is not all good news. “Construction costs will get even more out of control, and many Londoners will be living on a building site for the next seven years.”