East London Regeneration Drives Residential Re-Sales Market

Pockets of gentrification offer remarkable investment growth potential

2 Jun, 2017

East London Regeneration Drives Residential Re-Sales Market

Underdeveloped in years gone by, East London has reinvented itself as a residential property hot spot, with both buyers and landlords drawn to the area following its large-scale regeneration.

The success of government-backed gentrification initiatives on the banks of the River Thames has opened the doors to potential property price gains that are expected to surpass all other parts of London.

According to Caroline Palmer, Senior Manager with our International Residential Properties Services team, East London is “really popular with people looking for pre-completed properties. They have more room for investment growth, and there’s been a significant investment in transport and amenities in the area.”

In the residential re-sales market, we currently see a great deal of activity for “flipped” units that are near to, or a few months away from, completion.

“People are so keen to buy and invest, we need a larger stock of apartments for re-sale, particularly as Stratford doesn’t have a huge secondary sales market,” explains Palmer.

“We expect the market to acclimatize to the new political and economic environment and for East London’s place on the global stage to return to its pre-Brexit status,” adds Neil Chegwidden, Director with our UK Residential Research team.

It’s no secret that both home owners and investors are looking beyond Central London for “better value” properties, with East London providing much-needed supply in a capital city with a shortfall of around 20,000 new flats annually between now and 2021. But the property market is not the only sector that has its eye glued on East London. Businesses keen to expand their foothold in London are turning to the borough as well.

Stratford currently stands out from the pack, boasting the most affordable residential rentals and sales prices in London. Other prime contenders for price growth in East London are Canary Wharf—which will move within closer reach to the City once the new Crossrail station opens next year—Royal Docks, Bow, Canning Town and Surrey Quays.

JLL’s existing stock of apartments on the secondary market across all these residential areas includes a mix of studios starting from £330,000; one-bedroom flats from £410,000; two-bedroom units that start from £610,000; and three-bedroom apartments, from £700,000.

The relatively weaker position of the British pound against other major currencies while Brexit bumps are ironed out makes this an opportune time to invest in London property. We forecast sales prices to remain relatively stable this year, while demand for new and secondary homes is expected to increase slightly.

Greater London rental prices are forecast to rise by 19.9% annually from 2017 to 2021, versus Central London growth of 13.1%. As for house prices, we expect Greater London to rise 19.2%, compared to 15.8% growth for Central London developments.

The average price for residential properties in East London is £625 per square foot (psf), currently the lowest in the city and just one-third of prices in London’s Central Southwest area, which stand at £1,750 psf.

“Cheaper London boroughs have witnessed greater capital value growth compared with more expensive boroughs over the last couple of years, while previously less popular locations have seen higher demand,” comments Chegwidden.

Why consider the re-sales market?

There are any number of reasons to buy or sell London property via the re-sales market.

Maybe a buyer didn’t buy at the time of a development’s launch and later reconsidered and understood the potential for investment growth, reveals Palmer. “Once a buyer knows that the area is up-and-coming – like Stratford – they become more interested to invest and reap returns,” she notes.

Properties may enter the re-sales market because their owners made a sizeable gain on their initial investments ahead of their units’ completion. In these cases, owners may want to reinvest their gains elsewhere, or avoid paying mortgage costs or stamp duty on a completed property.

“If an owner bought a flat in Stratford for £360,000, they might only have put down a 10% deposit ahead of completion,” adds Palmer. “Yet, the property may now be worth £410,000.”

As with every investment there is inherent risk in property transactions, but when the chips are down in the residential re-sale market, the exit door stands open. The key to success, as always, is timing…

For more information about our International Residential Property Resales services, please contact Caroline Palmer