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Emerging Greater London boroughs outpace prime central postcodes for property demand

June 2, 2014Article by Ray Withers

New figures released by Savills show London needs 50,000 new homes a year to meet demand. The nationwide imbalance between supply and demand is most extreme in the capital, accelerating London’s house price growth to more than twice the UK average. This is partly caused by London’s booming population, which had risen to 8.4 million in 2013 and is projected to reach 9 million by 2020.

An acceleration in sales and planning applications over the past year means an average of just under 35,000 new homes a year are set to be built over the next five years. Even with this improvement there is a significant 15,000 homes a year shortfall, which is increasingly concentrated in the commuter belt areas of Greater London.

Investors look beyond prime central London to emerging neighbourhoods

Over the past 12 months Waltham Forest has topped the chart with a rise of 23.5 per cent, followed by Lambeth (21.9 per cent), Southwark (21.1 per cent), Islington (20.6 per cent) and Hackney (19 per cent). These boroughs are now outperforming the central London average of 12.4 per cent and must-have postcodes such as Kensington and Chelsea (12.8 per cent).

Susan Emmett, Savills UK residential research director, explains: “The unassailable demand for more homes in the mainstream markets makes the case for building and investing away from the centre compelling. Now is the time for developers and investors to look beyond the prime markets of central London.”

Paul McGowan, director for Savills Greater London development and sales, adds: “Emerging neighbourhoods and areas of regeneration carry the potential to create sustainable communities, lifting values and driving occupier demand to new levels.”

Greater London delivering greater yields for landlords

Greater London is also delivering higher yields for landlords. Data from Benham and Reeves Residential Lettings shows that, for the second quarter in a row, London rents have stagnated or declined in prime central London, while the outer boroughs have performed well. Hotspots such as Hackney, Acton and Lewisham have experienced phenomenal growth, outpacing some of London’s most desirable neighbourhoods such as Knightsbridge and Hyde Park, where rents have fallen.

This excellent combination of high growth and high yields is proving to be particularly popular with overseas property investors, who are said to be boosting the neighbourhood trends.

Overseas demand for super-trendy SE8 postcodes

Marc von Grundherr, lettings director for Benham and Reeves, told us: “There is a huge amount of overseas demand. Seventy per cent of our clients are overseas investors. Prices have shot up a lot in Prime Central London with rents set quite flat, but overseas investors, from The Middle East, Russian, America or wherever, are focused on yield. Because yields have been reduced, they are looking for places with better yields in Zone Two or Three.”

Following on the trend around Lewisham, Deptford is tipped to be the next hotspot. A £1 billion riverside regeneration scheme, swish new accommodation projects and a flagship Waitrose look set to turn Deptford into “the new Shoreditch.” The New Capital Quay development will feature an art gallery, museum, crèche, design studios, bars and restaurants; and even Deptford train station and its surrounding area is also benefitting from a £42 million mixed used development with apartments, town houses, workshops and retail outlets.

“A real transformational scheme” for a new centre of culture

Developers behind the Deptford masterplans, Hutchinson Whampoa, include the creation of three new parks and conversion of the area’s surviving historic buildings. For example the Grade II Victorian Olympia warehouse is set to become a new cultural centre for south east London.

Urban designer Sir Terry Farrell, on behalf of Hutchinson Whampoa, comments: “This will be a real transformational scheme. I can’t think of any other in London where there will be such a big transforming effect. The area is linked with figures such as Sir Walter Raleigh, Christopher Marlowe and Samuel Pepys – and its growing reputation as a cultural hub, colonised by artists, give it huge potential. You have got Goldsmiths nearby and there are lots of creative people living here. I think this is the equivalent of Hoxton or a Shoreditch of the south.”

Invest in one of “London’s main opportunity areas” today

Certainly Deptford ticks all the right boxes and it already has excellent transport links, with London Bridge 6 minutes away and both Canary Wharf and the City of London 15 minutes away.

Ray Withers, CEO of Property Frontiers, comments: “As London grows, so it pushes out its wealth to the surrounding areas and Deptford is where the smart money is right now. Boris Johnson called it one of “London’s main opportunity areas” and there is a definite influx of both City professionals and artists to the area. Right now the timing is perfect to invest in Deptford and add a super-trendy London postcode to your portfolio, along with a 4 per cent yield and excellent future growth.”

Get in touch on +44 1865 202 700 to find out more about investing in high spec apartments in Deptford and how you can gain up to 4.75% yields (higher than the London average of 3.43%).

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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