There are only a few weeks of the traditionally busy autumn period left before the Prime property market slows down for the festivities, but this year it seems that investors are competing for prime property around the commercially attractive Canary Wharf and E14 areas in particular. Reports suggest that the region is going against prevailing market forces, and while elsewhere there is a slight decline in the amount of £1-2million+ properties changing hands over the late summer and early autumn months across the capital, in the East of London numbers have grown.
We discussed last month that the Canary Wharf area in particular represented a strong investment opportunity for those looking for Prime London stock – particularly high-end apartments. And it seems that the trend is relevant to both sides of the river, with Greenwich now coming into its own as a prime location. According to data released by the Land Registry in Q1 and Q2 of 2015 prices in Greenwich rose by 2.6%, while in Canary Wharf and Docklands they were up by 3.4%. In Blackheath, another up-and-coming Prime area, prices increased by an impressive 14.4%. Canary Wharf sales in the first nine months of 2015 were 7% higher than in the corresponding period of 2014, which when taken against the relatively soft numbers seen across the rest of the capital, shows just how strong an investment opportunity in East London still is.
New business, new growth
The key reason for this boom in East London is an influx of high-tech industries and the resulting rise in the number of highly skilled, highly paid workers that accompany them. Demand is particularly high for Prime buy-to-let, and property experts Vanet are seeing an increasing number of queries from corporate clients who want to invest in Prime London property and then use it to house their senior executives.
“The banks are favourable when it comes to lending for buy-to-let investment at the moment, which means this part of the Prime sector is particularly buoyant,” comments Joel Brookes from Vanet. “Inquiries from corporate clients are up, and they’re making shrewd choices too. Not only does Prime London property represent a strong investment in itself, but utilising it as a corporate let means that the return is considerably higher, as corporate clients are more prepared to pay a premium rental value on the property. It can also be used ‘in-house’ as it were, for short-term tenancies for company executives who may be doing a six-month placement in London before returning back to their country of origin,” he explains.
As discussed in previous months, East London is not the only player in town when it comes to Prime property, and apartments near to the five royal London parks is also incredibly strong, with a big increase in value over the past few years. Currently, Prime London property around Regent’s Park, Kensington Gardens, Hyde Park, Green Park and St James’ Park are high on investors' wish lists, with Westminster’s Hyde Park area at the very top. Properties on the north side of the park are achieving values of around £3,500 per square foot, and apartments in general around the parks command a premium of around 20%, mainly thanks to high quality developments and that age-old factor, location, location, location.
Back in East London, the Docklands boom driven by high-tech investment continues, and while current supply is just about keeping pace with demand, there are concerns that in the future this may fall out of balance. If the area does, as many suspect, turn into the UK’s version of Silicon Valley, then the amount of capital flowing in will push the value of property ever upwards as cash-rich workers look for property and rental accommodation close to their place of work.
“Despite the number of new developments in Docklands and other areas such as Greenwich and Woolwich, there may come a tipping point where too many investors are chasing too few properties,” comments Joel Brookes. “At that point we may see a surge in value on Prime East London property, particularly in convenient locations such as Canary Wharf and E16. When that happens, those who have invested in Prime London property early on will see the value of their portfolios climb, while those late to the party will be paying a premium for the units that are left. So it pays to act sooner rather than later, as we anticipate the relatively soft market that we’ve been discussing this year will start to firm up in 2016, and values for both investment property and buy-to-let in particular will rise quickly.
“Currently, it’s a perfect opportunity to buy prime property, as not only will it become more expensive throughout 2016, but there will be less in the way of choice when it comes to new developments. We’re seeing a rush of off-plan purchasing, indicating just how much confidence investors have in the London Prime market,” he concludes.