Transport and schools are key to valuations
TRYING to predict where London’s house prices will go as a whole is a fools errand. The house price earnings ratio suggests property remains overvalued, but the influx of foreign cash combined with inflexible planning restrictions could see prices continue to rise. It’s easier – and more fruitful – to weigh up different areas.
THE FRENCH CONNECTION
Macro-economic uncertainty – particularly the Eurozone crisis – looms large over London’s property market. As Robin King, director at Move with Us explains: “With prime central London property it very much depends on what happens with external forces because it’s a global rather than local market.” Take South Kensington’s established French connection. If President François Hollande introduces his planned tax of 75 per cent on incomes in excess of €1m, France’s high-earners will flee the continent in favour of francophone friendly South Kensington. Hugh Wade-Jones of Enness Private Clients notes it “already holds the unofficial title of the twenty-first arrondissement of Paris – to the wealthiest French ex-pats the SW7 postcode will be key and worth the extra money.
A TENDER UNION
But France’s election would be overshadowed by the Eurozone’s collapse. David Newnes, director of LSL Property Services, thinks that the way the wider economy directs house prices may be rather counterintuitive at the top end of the market: “Because they are seen as a safehaven for international investors, super-prime properties in west London could see their values rise even further.” Newnes points out that “high net worth buyers don’t rely on mortgage finance and any contraction in lending would do very little to stall progress in this section of the market.” In fact, Newnes thinks “central London will weather any storm fairly well.”
Most home owners in Greater London and the wider south-east would be hit hard. Newnes thinks that if this worst-case scenario of a Eurozone collapse were to happen the resulting recession would lower consumer confidence, household wealth and prices.
THERE’S NO PLACE
Although the expected future value of a property isn’t the only reason for buying a place, nobody buys a house wanting it to decrease in value. At the local level, positive externalities drive higher comparative values. Wade-Jones picks out his top three: prestige, transport links and schools. The first of these often appears to be driven by the whims of fashions, but desirability is often driven by some concrete advantages.
Barry Jessup, who is commercial director at First Base says for maximum value, first time buyers should be considering neighbourhoods next-door to places currently in vogue: “There’s still some great hidden gems on the eastern fringe of the City, which are going to benefit from the forthcoming Crossrail. This is true of Stepney Green for example, which is sandwiched between Shoreditch and Limehouse and represents fantastic value for money, yet is only ten minutes to the city.”
Newnes thinks that regeneration and gentrification mean areas such as Southwark look like sound investments. He says “prices there have risen by 4.5 per cent this year, but schemes like the Elephant and Castle regeneration project and relatively low prices in a central location mean there’s plenty of growth potential for those looking for easy commuting at an affordable price.” King thinks areas that are being gentrified – like Balham, Brixton, Stratford and Kings Cross – are the next rung on the ladder: “Kings Cross has had so much investment and it’s so central and close to high paying jobs – while Brixton is the next wave out from Clapham.”
Of course, thousands of people commute in from outside of London. Paul Beresford, managing director of Beresfords says more first time buyers working in the City or elsewhere in the capital are considering looking to put down roots along good commuter lines, especially where there is growth potential. He points to the popular Essex towns such as Chelmsford and Brentwood, which have direct trains to the City taking 30 and 38 minutes respectively and also offer a good range of properties for first time buyers. He also thinks: “Shenfield is set to benefit from Crossrail when it opens in 2018.” First time buyers can visit www.crossrail.co.uk to see the planned route.