Spotlight: East of City

East of City
 
Outlook for the East of City

10 September 2015, words by Frances Clacy

Demand returns to the prime London market following the election.

 

The Sales Market

The outlook for Canary Wharf and Wapping needs to be considered in the context of the wider prime London market.

Across prime London, since the election some of the pent up demand is beginning to flow back into the market, although the new stamp duty rates are still keenly felt by buyers. This has restricted any significant increases in both prices and transaction numbers and we expect the prime London housing market to remain relatively subdued over the rest of 2015 and into 2016.

In Canary Wharf and Wapping, prime property values are not as high as other prime areas of London meaning the new stamp duty burden has not been felt as strongly by buyers and prices have not seen any falls. However, the lower end of the prime market across London, including Canary Wharf and Wapping, has been affected by the increased mortgage regulation which restricts the amount people can borrow and therefore limits house price growth.

In both areas, particularly in Canary Wharf, there is a large number of new build properties due to come to the market over the next five years. Still, supply is being met by strong demand for new build properties, demonstrated by the strong off-plan sales seen in some key developments.

The rental market

Over the next five years the London economy is forecast to continue strengthening, which will underpin demand for prime rental property over the medium term as more people move to London for employment opportunities. The City of London and Canary Wharf combined are forecast to see a 6.3% increase in the number of employees by 2020, taking the total workforce to 770,000 which we believe will result in an increase in demand for rental properties in close proximity to these employment centres.

In the prime East of City market, 31% of buyers over the past 18 months were investors, a significantly higher number than across prime London as a whole. Currently, the demand for rental properties in the area is outstripping supply, but there is a potential risk that if high levels of new build properties enter the rental market simultaneously then rents could come under pressure. This is more likely at the top end of the rental market as there is a larger number of luxury flats being built. However, over the long term, we believe that as the supply of rental properties increases, it will be met with demand resulting in a buoyant rental market.

 

 
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