12/01/2018 • news
Why the only way is up for apartments
Traditionally, a family house in an area undergoing gentrification was considered the type of property most likely to appreciate. This is evident in the performance of houses in areas such as the east London borough of Hackney, where the average price per square foot rose from £427 in 2012 to £685 last year — an increase of more than 60 per cent. However, with houses beyond the reach of so many homebuyers, experts are beginning to argue that the homes with the most potential for appreciation are flats in locations under regeneration.
Their values have already begun to rise faster than those of other homes. The national average apartment price has increased by 27.3 per cent over the past decade, according to figures from Lendy, a peer-to-peer investment group. This compares with rises of 19 per cent for terraced properties, 18.9 per cent for detached houses and 17.6 per cent for semi-detached houses.
The increases have been driven by younger house-hunters who, priced out of suburbs, have turned to developments on regeneration zones in London, Manchester, Liverpool and Glasgow, where prices are more reasonable.Flats in Sir Thomas House, Liverpool, have given an 8.4 per cent rental return in two years
The L1 postcode, which covers the centre of Liverpool, was named the most desirable place to invest across England and Wales by Which?, the consumer watchdog.The price of properties, most of which are flats, in this area popular with young professionals and the city’s large student population, rose from £85,000 to £120,000 between 2014 and 2015. As regeneration bears fruit, the average price has reached £125,479, according to Rightmove — well beneath the national average. Developments in this area include Sir Thomas House, where flats start from £75,000, with an 8.4 per cent rental return in two years.
Liam Brooke, the co-founder of Lendy, says: “Flats were once for people who couldn’t afford anything else, but that has changed. Many buyers are looking at areas that were formerly industrial sites close to the city centre, but have been redeveloped with residential complexes.”
Research from JLL, the property consultant, highlights the growth in the price of homes (mostly apartments) in regeneration schemes compared with the surrounding areas. In Elephant & Castle, southeast London, prices in the area’s eight regeneration schemes (composed of 1,360 flats) have risen from £750-800 a square foot in 2011 to £1,200 a square foot today.
Prices of homes in the Elephant Park scheme, which covers three of the developments, have risen from £600 a square foot in 2014 to £1,200 a square foot. This compares with £691 a square foot across the borough. The area is also becoming a key rental location as part of the purpose-built build-to-rent sector.
Meanwhile, prices on the Woodberry Down regeneration scheme in Finsbury Park, north London, have gone up from £400 a square foot in September 2009 to £950 today — a 138 per cent increase. This compares with a borough-wide £677 a square foot — an 88 per cent increase.
The value of homes in Hale Village in Haringey, north London, has gone from £300 a square foot in March 2011 to £650 today, a 117 per cent increase; borough-wide the figure is £467 a square foot and an increase of 73 per cent.
Flats in big regeneration schemes outside London have also appreciated strongly. Salford in Greater Manchester, which is the home of the £1 billion MediaCityUK development, has become a buy-to-let hub because of an influx of creative and digital jobs and a student population of 70,000. In the present market, fewer homes in Salford that are for sale have been reduced in price compared with the regional average. This is also the case for homes in other regeneration zones in cities such as Manchester, Edinburgh and Glasgow.
Nick Whitten, the associate director of UK research at JLL, says that in London, Nine Elms on the south bank of the Thames is likely to be the next big riser, even though a fall in interest from foreign investors in the area’s luxury flats last year triggered a 16 per cent drop in prices in the SW8 postcode, which contains Nine Elms and Battersea Power Station. It compares with a boom in nearby Brixton and Stockwell.
In August 2017 it emerged that Dalian Wanda, China’s largest commercial property company, had walked away from its £470 million acquisition of Nine Elms Square. “This is not about taking a punt on an area, but having an image of the long-term vision,” Whitten says. “The earlier you get into a ‘regeneration hotspot’, the better return on investment you will receive. Imagine what Nine Elms will be like when it is complete, with a shopping centre, underground stations and schools. The regeneration may be in its early stages, but homebuyers need faith.
“You would not criticise a book when you’re only a few pages in, and this is the same for these regeneration sites — they are in their early chapters.”