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247: London property investing - hotspots 2010-2012


01-01-2009

PropertyInvesting.net  team 

It gives us great pleasure in describing to our visitors the very best investment areas in London for a five year time frame. These are neighbourhoods and areas which we have researched for years – walked the streets – got a feeling for how they are going. And researched positive changes that will (or are likely to take place) in the next 5-10 years.

We’d like to describe to our visitors the very best investment areas in London for a five year time frame. These are neighbourhoods and areas which we have researched for years – walked the streets – got a feeling for how they are going. And researched positive changes that will (or are likely to take place) in the next 5-10 years. Yes – prices are dropping now, but we do not expect this to extend beyond 2009 in these areas.

Property prices will outperform in an area compared with the rest of a country if the following criteria are met (such criteria cause positive change):

·          Increase in employment anticipated with decrease in unemployment – jobs created, new business-retail-offices are created, and existing businesses are not in decline.

·          Infra-structure upgrades – new rail, tube, road, bridges, light railway, new stations, upgraded rail-roads and new connections, improved bus and tram services.

·          Major Regeneration and/or new developments – e.g. Olympics (Stratford), Westfield Shopping Centre (White City), Wembley Stadium (Wembley), Offices (Canary Wharf), Elephant & Castle Regeneration, Canning Town new housing, Chiswick Business Park.

·          Business sectors – if you believe private business to be more important than public sector employment, focus on areas with many new private sector jobs. You can also analyze the types of private sector jobs – e.g. manufacturing, financial/services, heavy industry, retail.

Despite the financial and economic turmoil in the UK, we still prefer to focus in areas close to financial-business services and light industry and avoid areas with high exposure to public sector jobs (which may start to decline now that funds have dried up) and manufacturing (which we have long held a view is in terminal decline).

 

 

 

 

Courtsey www.BorisWatch.com

An investor’s objective should be to consider all these aspects – the complex interlinking timelines, with area regeneration and redevelopment – then focus purchase of property in areas that will see POSITIVE CHANGE over a 2-5 year time frame. Hence rental demand and incomes will rise, property prices will rise and value in one’s investment portfolio will be created. Such regenerating areas in theory should outperform the overall market.  

To make it far easier for you, we have put the areas we believe have the highest incidences of overlapping positive attributes into a London Property Hotspot map – shown later in this article.  

Stratford – Example 1

For example, Stratford is obviously red because it has:

·          Olympic development

·          Retail developments

·          Stratford International Railway Station

·          Stratford City – new status

·          Dockland Light Railway extension to City Airport and Woolwich

·          Massive increase in construction and retail related jobs

·          Increasing wealth and new business moving in

·          Development of Eastern hub for London to start to rival Canary Warf and City of London

·          Fast commutes to Canary Warf, West End and City – via Eurostar commuter trains and tube network

·          Crossrail comes through Stratford – scheduled for completion 2017 – with direct fast trains all the way through to west London.

·          Proximity to the expanding City Airport, Canary Wharf and Excel Centre near Rock Docks – plus City financial district

All these developments have started to transform the fortunes of this eastern London suburb that was once a depressed backwater.  Prices have tripled since 1997, but further increases are likely leading up to the 2012 Olympics.

The specific areas we like the most are Victorian terraces about 0.3 miles SE of the City center, just north of Ham Park. We also like the strip of large grand Victorian houses just south of the Maryland to Forest Gate railway line starting about 0.4 mile east of Stratford City centre. Other areas just SSE of Stratford are attractive, as are the elegant Victorian houses of Hackney Wick about 1 miles west of Stratford City.

It’s difficult to see with so many positive things happening and in the pipeline, that prices will not rise some time between now and 2012.  

Shoreditch – Example 2

For example, Shoreditch is obviously red because it has:

·          East London Line stations opening in 2010 with through trains to Croydon and up to Highbury

·          Olympic development 2 miles to the east

·          Liverpool Street redevelopment close by

·          St Pancras International Railway Station – for Eurostar 0.8 miles to the NW

·          Dockland Light Railway connection to City Airport and Canary Wharf

·          Only 0.7 miles east of the City financial district – massive wealth generating area with many high paid jobs

·          Increase in second homes, pied-de-terre, weekday homes and holiday homes from UK and international people

·          Between City, Canary Wharf and Stratford and the Olympics in the heart of the east London regeneration belt

·          Fast commutes to Canary Wharf, West End and City

·          Crossrail comes through area – scheduled for completion 2017 – with direct fast trains all the way through to west London and east to Stenfield.

·          Proximity to the expanding City Airport, Canary Wharf and Excel Centre near Rock Docks – plus City financial district

Prices have shot up since 1996, but further increase are likely leading up to the 2012 Olympics and beyond. It’s convenience is excellent – and the area is regenerating at a rapid rate. The closer to Bank and Liverpool Street you can get for a low price the better – with quite Victorian streets the preference. Ex-council property is worth considering – for student and city rentals.

New Cross Gate – Example 3

For example, New Cross Gate is "orange" on the Property Hotspot map because it has:

·          Lowest priced housing in central London (some of the SE14 have an “0207” telephone Zone 2 prefix)

·          East London Line stations open in 2010 at New Cross Gate for fast through trains to Croydon and up to Highbury – a new station at Surrey Canal Road will likely open if/when the Phase 2 branch to Peckham through to Wimbledon gets the go ahead

·          Olympic development 2½  miles to the NE – albeit mostly over the river (Greenwich will host some games though, some 1.2 mile east)

·          East London Line new links to the St Pancras International Railway Station in 2010 – for Eurostar to Paris

·          Dockland Light Railway connection at Deptford Creek helps and is only 0.7 miles east – for links to City Airport and Canary Wharf

·          Only 1.4 miles SE of City financial district – massive wealth generating area with many high paid jobs

·          Between City, Canary Wharf albeit south of river in one of east London’s regenerating areas

·          Fast commutes by rail from New Cross Gate to Charing Cross, London Bridge and Victoria.

·          Close to Goldsmiths College – part of University of London – expanding student population that also helps regeneration

·          Proximity to the expanding City Airport, Canary Warf and Excel Centre near Rock Docks some 1 mile NE – plus City financial district

first-time-buyer-risk-house-price-crashWe particularly like two areas:

·      Hatchem Park (conservation area) – just to the NW of New Cross Gate – elegant small Victorian terrace house in quiet streets

·      Telegraph Hill (conservation area) – some 0.5 miles SSW of New Cross Gate – larger Victorian terrace houses close to the park, in quiet streets, some with hill views and up and coming neighbourhoods.

The listing shown below is prepared by PropertyInvesting.net to help property investors and provides a summary of many of the key investment areas within East and South-East London which are likely to be positively impacted by new infra-structure developments in the next ten years:

  • South London Line tube extension via New Cross, Brockley and Peckham (2010)
  • East London Olympics (2012 based in Stratford)
  • Dockland Light Railway extension to Woolwich (2008)
  • East London Line Tube extension to Hackney (2010)
  • Crossrail - Stratford to Heathrow (2017)
  • Eurostar International Station at Stratford and St Pancras (finished 2008-2009)
  • City airport expansion (ongoing)
  • Canary Wharf office space expansion (ongoing)

In General

Property purchased close to these new stations and infra-structure projects, preferably within quiet Victorian neighbourhoods, are likely to see significant above trend house price movements in the next ten years, continuing the trend experienced in the last 5 years. Why? Because the population of Greater London is forecast to expand by another 600,000 people by 2015 (a 7% increase) - and most people in the know cannot see anything like the house building required to keep up with this demand. In addition, London is likely to remain a critically important global financial and services centre - providing solid and relatively high paid employment. This despite the global financial turmoil of Oct 2008 that looks like leading to a UK recession in 2009 - we expect a rapid recovery end 2009 with property price increase in East London in 2010 onwards. 

If you consider the all new infra-structure developments together, then work out when these will occur and their overlapping spheres of influence from an impact and time stand-point, one can then work out the highest change of positive change, and the biggest impact regeneration will have within these areas. If positive change and regeneration take place, is highly likely the prices will firstly rise, and secondly rise at a high rate than surrounding areas. Good examples of areas with profound overlapping spheres of influence are:

  • Bow and Bow Church
  • Stratford
  • Forest Gate 
  • Hackney Wick
  • Plaistow
  • West Ham
  • Hoxton
  • Canning Town
  • Shoreditch
  • Kings Cross
  • Woolwich North
  • Woolwich
  • New Cross
  • Limehouse
  • Brockley
  • Forest Hill
  • East Peckham
  • Surrey Keys
  • Crystal Palace
  • Croydon
  • Leytonstone

London Property Hotspots 2008-2012 -  PropertyInvesting.net  Below is our property hotspots map.

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Properties purchased close to the new rail/tube stations and infra-structure projects, preferably within quiet Victorian neighbourhoods, are likely to see significant above trend house price movements in the next ten years, continuing the trend experienced in the last 5 years. Why? Because the population of London is forecast to expand by another 600,000 people by 2015 - we cannot foresee anything like the house building required to keep up with this demand. In addition, London is likely to remain a critically important global financial and services centre - providing solid and relatively high paid employment. This despite the recent financial turmoil Oct 2008 which we envisage to lead to a recession in the UK in 2009 but rapid recovery end 2009 and into 2010 and beyond. 

The key to the property price increases which are anticipated from mid 2009 to 2012 is the Olympic regeneration and development programmes planned and being built. Billions of pounds will be spent regenerating previously derelict areas of the Lower Leas Valley around Stratford and southwards to the River Thames. These developments will improve rail, tube, road and general infra-structure which will:

  • Make East London more desirable to live for wealthy workers
  • Improve social and economic conditions in this deprived area of London
  • Increase employment, business and public sector employment and wealth
  • Thence increase property prices and rental prices
  • Give high return on investment for property investors - this is our expectation (from mid 2009 onwards, we advise holding off from purchase until the bottom of the market is reached - we expect this to be mid 2009)

If you walk around these areas, you will be able to imagine how they may look like Kennington or Fulham one day - if the infra-structure developments transform East London as some people expect. It will never be West London, but the centre of gravity of London has been and will be pulled eastwards in future years as East London becomes more desirable to live in.

These are some of our top potential regeneration hotspots for the next four years in the UK - all of these will be positive impacted by the Olympics, East London Line, Eurostar (High Speed One), City and Canary Wharf financial developments, and Docklands Light Railway extensions. The below maps should help your selection of investment areas.    

Is now a good time to buy in these area?

 

Indeed, it could be a good time to purchase property at present - the best time to buy in the UK year is probably the first week of December – but early January is not bad either – why?

 

  • Miserable weather – dark, cold, rainy, short days, long nights
  • Miserable feeling in the air
  • People focused on Christmas shopping, Christmas parties, finishing work late to enable a Christmas and New Year’s holiday, then recovering from New Year celebrations and social engagements – then preparing for work
  • Kids still at school – everyone busy working, shopping or partying
  • Buyers are disparately trying to get an offer before Christmas – to allow them to have a stress free Christmas
  • City bonus money has not arrived (bulk of bonus money is paid mid January to March)
  • Not much City bonus money this year

 

January isn’t a bad month either although the market tends normally to hot up a bit after Christmas and New Year – there is normally a feel good (or at least a feel better) factor.

 

One needs to avoid competition from motivated buyers and search for the most motivated sellers – to achieve lowest prices.

 

Currently, these exceptional pretty exceptional circumstances that lead to less competition:

 

  • Very few first time buyers – albeit they started appearing in Dec 2008
  • Not many normal buyers
  • Only a few bottom feeding investors around
  • Lack of mortgage funds available – no let up in sight yet (though expected to improve by March)

 

Added to these, some fear factors:

 

  • Fear of falling prices due to stock market crash and unemployment
  • Fear of major recession and worsening economic outlook
  • Increase in repossessions – very quiet auctions and empty properties
  • Fire sales from developers of new build flats and houses
  • Stock market crash of October and November 2008 

 

Added to these positive factors:

 

  • Drastically reduced interest rates – with more likely to come
  • Big fiscal stimuli planned for 2009
  • Oil price crashing from $147/bbl to $40/bbl
  • Some very early and tentative signs of a recovery
  • Correlation with maximum fear = best time to buy
  • Inflation falling fast allowing further interest rate cuts
  • Mortgage companies beginning to drop rates and unfreeze loaning
  • Price to earnings rates have dropped from 5.8 to 4.5 – with long term average of 4

 

Thence one might form the view that the winter of 2008/2009 could be the best time in 25 years for investors to buy property - at bargain basement prices.

 

The Doubting Thomas’s will say – prices are forecast to drop another 10 to 15% or more. To which we say – when was a forecast ever correct? Who forecast a recession in the UK in April 2008? Who forecast interest rates dropping from 5.75% in 2008 to 2% or lower by year end? Who forecast oil prices crashing from $147/bbl to $40/bbl within the last five months?

 

Okay – if you buy property now you, it might be that property prices slide a further 10% by end 2009 or more. But if you buy property now, you may be able to pick up a distressed sale that could knock up to 25% off the sale price – particularly if you buy at auction or you buy cash and can close within a few weeks.

   

Are we buying now? No – not yet – because we haven’t got enough liquid cash to take advantage unfortunately. We’d rather reduce our risks by waiting a bit longer – seeing a clear bottom then jumping in again. We’ll probably start mid 2009 – but we might strike a little too late – if the bottom of the market is seen and is real – it could be too late and we’ll have missed an extra 10% on asset prices – this is the downside of waiting. And don’t be surprised if it hots up quickly – prices can start rising with a month if the market turns – and it could do with rates at 1%!

 

We have this feeling that with interest rates at 2%, as soon as banks start lending again, their could be a lot of pent up demand after about 1½ years of the market being in the doldrums – there is definitely a scenario that a very fast recovery could occur. No – this is not mainstream thinking. But, since when did mainstream make money anyway?

 

So in summary, London – a few other things come together:

 

  • Olympics 2012 not far away
  • East London Line Railway
  • Crossrail
  • Infra-structure spending to prevent recession
  • Dockland Light Railway Extensions
  • Stratford Regeneration
  • Croydon Regeneration
  • White City Regeneration
  • No stamp duty on properties below £150,000

 

Plus, the lower Pound Sterling value should start driving growth in a few months time as exports increase, London tourism stays robust assisted by lower oil prices and lower air fares. Or at least prevent a major prolonged recession. Do not be surprised to see the beginning of a recovery in February 2009 - with 1% interest rates, $40-$50/bbl oil, inflation at 1% and stock markets recovering. 

 

And don't forget, if you are the only investor active in town, why would you take the risk of further house price falls next year - the only reason would be your offer is 25% below asking price - hence reduces your risks to a minimum. And yes - property prices have been over-inflated from easy loans - times have changed. 

 

So we encourage you to challenge yourselves as to why you would not buy when it looks particularly bleak – just as one should be considering selling when euphoria takes over. As Warren Buffett says. “buy when there is the maximum depression and panic, sell when there is euphoria” – and you wont find much better time than at he beginning of a major recession and uncertainties around rising unemployment. And the miserable cold dark damp weather helps even more – you wont find much competition on the streets when it zero centigrade, damp, dark and city bonuses have almost dried up.

 

Best not wait until the spring blossom has come out – everyone will be feeling in a more positive mood and prices will probably reflect this.

 

We hope these insights help your investing in 2009 – and we hope it will be a good year for you!

 

London Greenwich Peninsula Olympics 2012 Regeneration 2012 - Millennium Village boom area

 

london-greenwich-olympics-regeneration-2012-boom-peninsula

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

London Barking Dagenham Regeneration Road North

 

london-barking-dagenham-regeneration-road-north

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

London Olympic Regeneration Lower Leas Valley and Canning Town - property hotspots

london-olympic-regeneration-lower-leas-valley-canning-town-boom

 

 

 

 

 

 

 

 

 

 

 

 

 

 

London Olympics 2012 Regeneration Site Stratford East London - stadium being built - the area will be transformed from a once depressed backwater to a vibrant hub with new Stratford Internation station with direct trains to Paris, Brussels and St Pancras in London (7 mins trip!)

 

london-olympics-2012-regeneration-site-stratford

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

London 2012 Olympics Property Investing Hotspot Stratford

london-2012-olympics-map-property-investing-hotspot-stratford

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

www.google.com  

Courtesy Google, London Development Agency, TFL and Olympics Committee

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