House prices show first signs of 'Crossrail Effect'
The Crossrail development is boosting house prices
First evidence of the “Crossrail Effect” on the price of new homes was discovered on Monday, after clambering into an £80 million concrete box in Woolwich.
The submerged chamber at Royal Arsenal is 256 metres long, capacious enough to embrace a falling skyscraper, and designed as the perfect fit for a Crossrail station. The stop will cut the journey time to Bond Street to 21 minutes from 45.
“Prices have risen from £450 per square foot to £550 since last June, when it was announced the station would be built into our box,” says John Anderson, chairman of Berkeley Group’s East Thames division. His remarks came after a descent to platform level and a tour of the 85-acre former munitions site, which holds 2000 homes with space for 3000 more.
Given that prices were £200-£225 a square foot in 2001 when the project began, the £100 uplift since last June must surely be icing on an already rich cake? “We’ll only get half that £100,” says Anderson. “There has been a massive increase in building costs in the last year. We are also going to be building bigger units in the next phase and to a higher specification.”
Woolwich will never be Westminster despite Berkeley hiring Tara Bernerd to design the interiors of the next 600 units. But the price list shows a 1064-square-foot flat costing £605,000. “There was a half million capital ceiling in Woolwich,” says James. “That’s now gone.” But it has not been a cakewalk, suggests James, who has tended the land for 13 years. “This has been a really difficult site.”
He hints that Berkeley was close to walking away from the £1.2 billion development in the mid-Noughties. Then a Crossrail stop at Woolwich was not guaranteed. Then Berkeley had to punt £80 million on the box, in the hope the trains would stop. “We’ve not got our money back yet. We are seeing growth. But we had expected to see more by now.”
There’s good news for a second beneficiary of the Woolwich station, due to open in 2019: the taxpayer. About £1 billion of the £14.9 billion cost of the east-west link will be offset by profits Crossrail anticipates making from three million square feet of development around 38 stations. At Woolwich, Crossrail is taking a different approach to Berkeley, building homes for rent not sale.
Crossrail property director Ian Lindsay was also on the tour, garbed in Day-Glo safetywear like everyone else. “We are thinking of doing a private rented scheme over the station,” he says. Planning permission has been submitted to build nearly 400 homes in towers alongside a “senior living” block Berkeley is already building.
The resurgence of the Private Rented Sector was predicted for almost as long as Berkeley has owned the Woolwich site. But now big insurers such as L&G and M&G are looking to invest in schemes that provide steady, if modest, returns.
As the Woolwich tour took place, the Investment Property Databank was releasing details on how much money PRS makes. Anyone who invested £100 on January 1 2013 would be able to sell for £114.70p. The trouble is £11.70 of that is accounted for by rising prices. The net rental return was 2.7%. Poor income — but a return that does not allow for the surely proven “Crossrail Effect”.