Developers and estate agents are on thestarting blocks, poised for the starting pistol … and the race is on. Within four hours of the announcement that London would host the 2012 Olympics, more than 30 residential big guns, from Persimmon, Knight Frank and HBOS downwards, issued press releases predicting gold medal performances for local housing markets.
Their enthusiasm concentrated on two angles that continue to occupy the minds of residential analysts.
First is the prediction that the Games will lift all London property prices, particularly those in eastern and northern boroughs that lag behind their central and western counterparts.
Second, it remains to be seen whether the infrastructure improvements that go with the Games attract further residential developers after 2012. Common sense would say yes but, at the nearby Thames Gateway, there is already a huge pipeline of housebuilding committed for the next decade.
On the first point, there is substantial evidence that most recent Olympics have encouraged rapid and sustained price growth for existing stock in host cities (see box, p123). London, in common with Barcelona, Atlanta and Sydney, has chosen to place its main Games sites in an area underperforming in terms of house prices, so this one-off boost would benefit the entire capital.
Each of the previous four host cities has seen house prices rise by more than the national average during the five-year run-up to their own Olympics. The level of city-v-nation outperformance was, on average, 18%. But will this be the story for London?
“On the day of the announcement, there was a massive increase in enquiries,” says John Bowles, head of planning at NAI Fuller Peiser. “Prices in the area have already risen by between 5-15%. Interest in existing stock is likely to build, with values expected to increase at least by 18% from today’s prices.”
However, as the weeks have elapsed, a more considered analysis has emerged. Much of it has taken into account the likelihood that the next three years will, at best, be very quiet for residential prices, with few significant rises expected amid lower turnover. In addition, the broader economic outlook for the UK is also muted.
Strongest growth
“Prices are already strong in east London because of past regenerative schemes, such as the new East London line extension, or smaller projects like the restoration of iconic London facilities such as the Hackney Empire,” says Matthew Leitch of east London property consultant Currells. “The Olympic announcement will strengthen the market but, perhaps, will not yet change prices and the level of activity as much as previously thought, simply because they are already healthy.”
Dan McLeod at local consultancy Atkinson Macleod says: “The strongest growth in prices will happen in the run-up to the Olympic Games, not the aftermath. Look at the Jubilee Line. Everyone thought the expectation and hype surrounding its opening would send prices soaring, but that didn’t happen. Most of the growth took place while it was being built, particularly in the early years.”
While there is unanimity that the Games will create at least some price inflation for existing stock nearer to 2012, there is no industry-wide view that it will accelerate momentum at the country’s largest housebuilding programme, Thames Gateway.
The most optimistic view expressed so far is that developers will have little excuse not to expand their programmes, because the infrastructure will be extensive and – thanks to the pressure of the world’s media – could, for once, be delivered on time.
For example, Barcelona’s 1992 Games led to 10,000 new homes, 78km of roads, an improved sewage system and almost a doubling of park space and beachfront in the city. East London should, in principle, be the same -although there is little chance of a beach.
The 500-acre Olympic Park from Hackney Marshes to the Thames will include 9,000 homes (at first for 17,800 athletes and officials, then for reallocation to private and social housing markets on a roughly 50:50 basis). There will be a 45% increase in ca-pacity on the Jubilee line, an expanded transport hub in Stratford and a train running every seven minutes from King’s Cross, designed to carry 320,000 people per hour.
Knight Frank, which is advising developers of 25,000 homes in the Thames Gateway, has become the first major residential player to open a branch in the area.
Its office at the Royal Docks was planned well before the Games announcement but, according to the firm, is “a demonstration of commitment and confidence in the subregion’s residential markets” following the Olympic decision.
Charlie Hart, who heads Knight Frank’s Gateway venture, says: “The Olympics serves as a catalyst to the Thames Gateway. The immediate areas around Stratford, the Royals, the Lower Lea Valley and Hackney will benefit most. Planned infrastructure improvements – crucial to the success of the regeneration programme – should also become more high profile which, hopefully, will encourage the government to ensure they are delivered on time.”
Regeneration programme
With a stagnating housing market, no volume builder has dared respond to the Games announcement by pledging more homes to exploit the huge amount of infrastructure that will be built in seven years.
“Wait and see – but don’t expect an announcement until 2011 at the earliest,” one developer told Estates Gazette.
In the longer term, more than one builder has expressed off-the-record worries about the future use of some parts of the Olympics infrastructure. As another developer put it: “We’ve heard what’s happened in Athens. How would you sell a new home next to a cycling stadium that’s been used once and has already been empty for a year?”
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Property values in Barcelona rose an average of 131%, against an 83% hike in all Spanish house prices, during the five years before the 1992 Olympics. The main area of development for the 2000 Sydney Olympics, Homebush Bay, was a derelict industrial site 20 minutes from the city centre, and very similar to the Lea Valley. House prices in Homebush rose 70% in the five years before the Olympics, compared with 50% in Sydney’s city-wide market. The 2002 Manchester Commonwealth Games prompted more redevelopment than envisaged for central Manchester. From 1997 to 2002, property prices in central Manchester rose 102% against a 52% rise in North West regional values and an 83% increase in prices across the UK. |
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Source: HBOS/Centre d’Estudis Olympic |
