LONDON (MarketWatch) — The multibillion pound regeneration of London’s East End, home to the 2012 Olympic and Paralympic Games, is unlikely to yield a house-price boom analysts say, but landlords stand to make long-term income streams from the area’s new developments.
A key element of London’s successful bid for the 2012 Games was the promise of transformation in east London, formerly an industrial outpost of the capital, now home to the Olympic stadia and other major investments for the Games. See also:
As part of the project, the London Organizing Committee of the Olympic and Paralympic Games, or LOCOG, promised thousands of new homes for sale and rent, which many expected would lift prices in the area.
However, with about a month to go until the opening ceremony, house prices in the neighborhood are showing little improvement.
Land Registry data for April show house prices across London rose 5.1% versus April 2011, but in the east London borough of Newham, home to the Olympic Park, prices moved up just 2%.
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“If you look at data from the Land Registry, prices have not boomed in any way — they have followed the regional pattern really,†said Liam Bailey, head of residential research for property company Knight Frank.
“The only market that has had a boom really in last few years is the prime central London market, Kensington and Chelsea, on the back of foreign money because it is seen as a haven for nervous investors,†Bailey added.
Prices in Kensington and Chelsea have jumped 11.6% in the last year.
Buy versus rentRental prices have performed better than house prices, according to a rental index conducted by leasing company HomeLet. London rental prices in April were up 7.1% on the prior year, with those in east London (an area which includes and extends beyond Newham) outpacing the rest of the capital, rising 8.6%. HomeLet dubs this the “Olympic Impact.â€
Bailey, however, is skeptical about the existence of such an effect and offers an alternative explanation. “London has a growing population and east London is a growing area as it is affordable compared with the rest of [the capital],†he said. “The Olympics doesn’t really have any impact in terms of demand, the infrastructure is the main legacy.â€
Some of the infrastructure improvements are already complete, including parts of the 6.5 billion pound ($10 billion) investment in London’s transport system, as well as private ventures like the £1.5 billion Stratford City Westfield Shopping Centre. However, many more, such as housing projects, are still taking shape.
Until those developments conclude, it’s too soon to look for an Olympic housing boom, said Yolande Barnes, director of residential research at real-estate firm Savills.
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