The Track to London's Prosperity Lies on the Railways

Last month, the government announced the High Speed 2 (HS2) rail link between London and Birmingham will go ahead. Meanwhile, the Crossrail scheme within the capital is continuing, providing improved transport links to several districts....

Last month, the government announced the High Speed 2 (HS2) rail link between London and Birmingham will go ahead. Meanwhile, the Crossrail scheme within the capital is continuing, providing improved transport links to several districts. What can investors expect from the performance of London property prices in areas directly affected by one of these infrastructure projects? Could the new railway schemes make real estate investment in the capital and its surrounding areas an even more attractive prospect?

According to the director of MyLondonHome Steven Herd, both projects will help boost the value of property in and around the city. "Major infrastructure investment that brings tangible benefits, such as improved access and improved journey times, has a proven positive effect on property prices," he asserted. Mr Herd cited the examples of Canary Wharf and Greenwich Peninsula, explaining commuters had previously discounted these districts as viable places to live due to poor transport connections with central London. Now, better rail links have delivered easy access to the City and West End, making real estate in these areas much more attractive to investors and owner-occupiers alike.

"Crossrail will have the same effect, taking up to 40 minutes off the journey time from east London to say Heathrow and a similar amount off the journey time from Maidenhead to Liverpool Street," Mr Herd stated. Research published by Knight Frank at the end of last year backs up Mr Herd's predictions, with the firm noting Crossrail will have a significant impact on property values in the City and City Fringe districts. According to the organisation's research, new-build homes in the City that currently sell for around GBP 800 per sq ft will be worth GBP 1,750 per sq ft by 2016. Similarly, the price of housing in the western and eastern fringe areas is expected to climb from GBP 850 per sq ft and GBP 750 per sq ft to GBP 1,300 per sq ft and GBP 1,200 per sq ft respectively.

A similar effect is anticipated for property values in the areas directly affected by the HS2 rail link. George Hankinson, managing director of London Central Portfolio, is confident the proposal will cause prices to move upwards. "Because HS2 comes into Euston, you've kind of got that hub around Euston, Kings Cross, Bond Street [and] Tottenham Court Road - to that area is Fitzrovia and Bloomsbury really. That area could see a definite spike in prices, as people realise how well linked it is to get through town," he commented. Fitzrovia was identified by the Knight Frank London Hotspots report as one district to watch, with the firm predicting that properties in the Fitzrovia/Marylebone region will rise by 66 per cent by 2016. The estimate was made before the final plans for HS2 were announced, which means further price appreciation in this district could be on the cards.

Looking to the commuter towns outside London, Mr Hankinson stated any settlements that will benefit from a new station or reduced journey times into the city centre due to HS2 will see the value of houses increase. "There will definitely be a corresponding uplift in prices if people can get into London quicker," he asserted. Mr Herd agreed with this sentiment, noting the "increased mobility will clearly lead to price swings [for those] that most benefit from the network". Earlier this month, the Daily Mail cited figures from Savills, which revealed reducing the journey time from a commuter town to London by just one minute adds approximately GBP 1,300 to the value of a terraced home, while detached houses can see prices climb by GBP 2,250. Analyst at Primelocation Nigel Lewis told the news provider that dramatically reducing the amount of time it takes to travel from Birmingham to London could even encourage people to live in the Midlands city and commute into the capital.

Mr Herd also believes Birmingham will see a positive impact on its real estate values as a result of the HS2 rail link. Meanwhile, he is confident the area around Euston is likely to see the cost of buying property climb, too. Mr Herd cited the effect the Eurostar had on real estate values in both the Waterloo and Euston districts when its terminal opened there as a precedent for price appreciation.

- Thursday 01 March 2012

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