LONDON DEVELOPMENT HOTSPOTS - RESIDENTIAL RESEARCH RESIDENTIAL DEVELOPMENT OPPORTUNITY AREAS 2018 - Elliman
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RESIDENTIAL RESEARCH LONDON DEVELOPMENT HOTSPOTS RESIDENTIAL DEVELOPMENT OPPORTUNITY AREAS 2018 AREAS TO WATCH PRICE FORECASTS MARKET UPDATE
HOTSPOTS 2018 RESIDENTIAL RESEARCH
AREAS TO WATCH FIGURE 1
LONDON’S FUTURE RESIDENTIAL DEVELOPMENT ‘HOTSPOTS’
Knight Frank’s Hotspots report identifies areas across WOOD GREEN A406
London where there is the potential for residential 13
13
12
12
A41 A406
development values to outperform the wider market. TOTTENHAM HALE
HARRROW
This is the third Hotspots report, and leave the EU and additional stamp duty.
while some previously identified locations Planing policies in the capital have also
still make the list, other, new, localities evolved following the election of a new
have been identified for 2018. The Mayor in 2016. A12
Hamstead
methodology for identifying these areas, Heath 18
which is set out in detail on page 8, Average prices across the London
market fell on an annual basis in London HAMPSTEAD
includes examining upcoming transport 16
XX
infrastructure upgrades, large-scale for the first time in eight years in 2017, WEMBLEY 10
10
regeneration or place-making and according to Nationwide. However, this CAMDEN HACKNEY
identifying areas in which there is a price headline figure masks a multi-speed 77 OLYMPIC PARK
differential compared to neighbourhoods market with some boroughs still seeing A40 3
XX
close by. price growth. A312 6
XX 17
XX
Regent’s
It is worth noting that the prices we are 4 Park
XX
As seen in previous reports, transport 5
XX
examining in the hotspots are quite
infrastructure upgrades, regeneration and 9
XX
distinct from our wider market forecasts,
realm change are all factors which can 15
XX
which include all types of housing. OLD OAK COMMON 1
XX
feed into new-build and second-hand 11
Instead, we are looking at localised areas, SOUTHALL Hyde Park
comparing an assumed present-day market pricing.
8
XX
value for new-build property to the prices The new development hotspots identified
that may be reached by the end of 2021. feature a wider geographical spread than 14
XX
2
XX
We have assumed that best-in-class HAMMERSMITH
previous reports. In terms of values, the GREENWICH
developments will be delivered in
majority are localities where new-build M4 BRENTFORD
each location.
developments are priced at sub-£800psf
The development landscape in London and most are also outside zone 1. This A2
BATTERSEA
has changed in the two years since Knight emphasises the changing landscape for
Frank’s previous report. These changes development in London, with a greater Source: Knight Frank Research
have been triggered by political, economic focus on affordability.
and policy events – not least the vote to
The timeframe over which we are
forecasting, 2018-2021, encompasses 2018 HOTSPOTS Hotspots not ranked in order of forecast growth ZONE 1 NEW HOTSPOTS
FIGURE 2 the opening of the Queen Elizabeth Line 2018 2021 2018 2021
PRIME CENTRAL LONDON PRICES The financial demands of undertaking large
(Crossrail). In many cases the opening of urban renewal projects are material and it is 1. MAYFAIR £6,000 £7,000 11. SOUTHALL £600 £750 REGENERATION KEY
ANNUAL CHANGE the high-speed rail link from the end of essential that it is recognised by all parties
next year has already been priced into that pump priming prices is a necessity,
15% not only to ensure financial viability but 2. EARLS COURT* £1,650 £2,100 12. TOTTENHAM HALE £675 £750
sales values in and around station hubs,
Stamp duty on £1m+
also to encourage developers, through
although for stations where large-scale profit, to commit to these projects. Given Pre-regeneration
homes rises form 4% to 5% 3. KING'S CROSS £1,600 £1,850 13. WOOD GREEN £650 £800
10% development is still in the pipeline, pricing the current conditions, particular attention
Stamp duty for £2m+
could reflect this in the future. and emphasis is needed to ensure the
homes rises to 7%
built environment is of the highest quality. 4. LISSON GROVE £1,400 £1,850 14. CHARLTON RIVERSIDE* £550 £700
The changing dynamics of the London In particular we believe many schemes
5% Early regeneration
need to over stretch the upfront cashflow 5. FARRINGDON £1,450 £1,750
Vote to Leave EU market in the last two years have also had
Stamp duty reform:
to deliver exemplar product set into a LOWER LEA VALLEY
removal of “slab structure”
an impact on the performance of some of high quality realm. Where successful, the
0% our 2015 hotspots. Some of these areas rewards will follow. However, it is important 6. SHOREDITCH £1,300 £1,500
Extra 3% stamp duty that these are not seen just as super
for additional homes have not seen the growth in pricing over 15. ROYAL DOCKS £800 £1,000 Sense of ‘place’ created
profit, instead they should be considered 7. CAMDEN £1,100 £1,500 but further phases
the timeframe forecast, but are still seen in the context of each scheme’s long-term to be delivered
-5%
as areas of opportunity. Other hotspots heritage and environmental contribution. 16. HACKNEY WICK £700 £850
identified in 2015 are no longer included in 8. CANADA WATER* £900 £1,250
JAMES KEEGAN
-10% the list, in many cases because they have RESIDENTIAL DEVELOPMENT CONSULTANCY 17. WEST HAM* £700 £950
Regeneration
2011
2012
2013
2014
2015
2016
2017
reached their outperformance potential, 9. OLD OAK COMMON* £750 £1,000
not the value-add
and are likely now to move more in line 18. LEYTON £675 £800 factor
Source: Knight Frank Research with the market. 10. HACKNEY CENTRAL £875 £1,000
* dependent on critical mass being achieved in timeframe
2 3HOTSPOT FACTORS
Place-making Achieving critical mass is a key
Transport
Investment in improvements to public Changes in transport infrastructure
assumption in a number of our
spaces and upgrading existing town stimulate and open up parts of a city,
centres is helping to drive demand hotspots, as this delivers the attract investment, create additional
across the capital, as well as opening perception of change, which in turn demand for housing and can bring
up previously under-used land for drives value. There is undisputed new energy to markets in and around
both residential and commercial broad demand for new homes in transport hubs. The opening of the
development use. As the need for new Elizabeth Line this year will cut journey
these areas, however, there remain
housing continues to rise, the creation times across the capital, opening
of new neighbourhoods will become tangible threats to delivery in the up new markets and improving
increasingly important. form of uncertain macroeconomic connections in existing ones. Proposed
conditions, Government cooling and future transport upgrades, such as
measures and restrictive planning HS2 and Crossrail 2 are likely to further
drive development in and around
policy direction. The key to
station hubs.
successful delivery will lie in
creative and thoughtful solutions
to these threats, to meet the
demands of both policy makers
and developers alike.
CHARLIE HART
HEAD OF CITY AND EAST DEVELOPMENT
Regeneration Price Development
Regeneration can lead to a wholesale
change of identity for an area. The Differential Net supply of new housing London rose
to 39,560 in 2016/17, compared to the
Mayor of London is working alongside 66,000 new homes a year needed in
local authorities and developers to bing Changing dynamics in the residential the capital. This imbalance looks set
physical improvements to London. market in London are reflected in the to continue. There are a number of
Many large-scale schemes planned or 2018 development hotspots. Demand areas of the capital where large-scale
currently under development in London has increased in the outer boroughs and development projects are currently
will also see the provision of new this is driving strong residential price taking place, many of which won’t
shops, restaurants and cafés alongside growth, yet average values across the be fully completed for a number of
residential property. Where this is area remain lower than London’s average. years. As demand continues to outstrip
happening, we see potential As investment in infrastructure and supply, these new neighbourhoods
for outperformance relative to the regeneration continues, these areas have are expected to benefit and have
wider market. the potential to help deliver a wider range the potential to outperform the wider
of new homes. market. However, the changing policy
landscape could weigh on new supply in
some areas.
4HOTSPOTS 2018 RESIDENTIAL RESEARCH
FOCUS ON NEW HOTSPOTS
SOUTHALL/HAYES
CURRENT PRICING: £600 PSF
2021 FORECAST: £750 PSF
CAMDEN TOWN
CURRENT PRICING: £1,100 PSF
2021 FORECAST: £1,500 PSF 38%
PROJECTED GROWTH IN
NUMBER OF HOUSEHOLDS
IN INNER LONDON 2012-
Southall will see a significant reduction Camden Town is receiving a multi- 2037 (DCLG)
in journey times once Crossrail trains are million pound investment from the
in operation in 2019. As of yet, there has Mayor’s Regeneration Fund, plus £1m
been very little development activity in from Camden Council, Camden Town
the area, but there are a number of large Unlimited and Transport for London, billion regeneration blueprint for the
projects in the pipeline that will enhance to improve public space and invest in Church Street ward, in which Lisson
the area’s amenity offering, as well as local business. Over 150,000 people a
Grove is located, earlier this year. As
delivering new homes. There is currently week visit Camden’s markets, shops,
part of the plan, the local authority has
one development under construction restaurants and music venues. Part of
pledged to favour art and antiques
within a 15-minute walk of the Crossrail the redevelopment includes the Camden
tenants over other uses when shops
station, with a further eight developments Lock Village development, which will
come up for lease, with the aim to turn
in the pipeline with permissions for 4,489 comprise eight buildings, a new canal-
private units. The level of development it into a market to rival Portobello Road.
side market, cafes and restaurants,
and regeneration set to take place around This comprehensive regeneration and
a cinema, 195 residential units, a
the station indicates that Southall has improvement to the local housing stock
food quarter and commercial space.
the potential for price outperformance will enhance values.
Nearby Euston Station is also set for
relative to the local area. improvements, with six new high-speed
platforms being built to support the CANADA WATER
WOOD GREEN opening of the first branch of the HS2
CURRENT PRICING: £900 PSF
CURRENT PRICING: £650 PSF route in 2026, and a further five high-
2021 FORECAST: £1,350 PSF
2021 FORECAST: £800 PSF speed platforms planned for the opening
of HS2 phase 2, which runs from London
to Leeds and Manchester. Technology
giant Google’s plan to open a new head
office down the road in King’s Cross The Canada Water Masterplan, led by
The local authority, Haringey, underpins the status of the wider area as British Land, is a £2 billion project to
has earmarked over £3 billion for a business, as well as a residential, hub. create a major new town centre within
development in Wood Green, which If granted, the plans for an interchange Southwark. This will comprise 3,500
would include 60,000 sq ft of new for both Crossrail 2 and HS2 in Euston new homes, offices, shops, restaurants
employment space and the potential will enhance this standing. and public spaces, including a three-
creation of 4,000 jobs. The development acre park, a cultural and leisure centre
would also include 7,700 new homes and a new campus for King’s College
and a new town centre with shops, LISSON GROVE London. Work is already underway on a
restaurants and cafés. The local authority CURRENT PRICING: £1,400 PSF mixed-use, residential-led development
points to the opening of the Green 2021 FORECAST: £1,850 PSF by Notting Hill Housing and Sellar
Rooms on Station Road in June 2016, Developments on an eight-acre site in
a social enterprise that offers affordable the heart of Canada Water. Transport
accommodation aimed at people connectivity in the area is already of
working in the arts, as a catalyst for Lisson Grove has lagged behind a high standard, with the Jubilee line
regeneration in the area. Wood Green is neighbouring areas of Regents Park, St offering journey times of 2 minutes and
a 15-minute journey to King’s Cross John’s Wood and Marylebone in terms 12 minutes to Canary Wharf and the
on the Piccadilly line. It has also been of capital values over the past decade. West End respectively. It is also a key
shortlisted as a potential station along the Its relative affordability compared with interchange on the Overground network.
Crossrail 2 line – this is important to the prime central London makes Lisson The new masterplan, coupled with the
plans for the area, but regeneration will Grove well placed to benefit as buyers existing transport links, will serve to
continue whether or not the route gets widen their search areas. Westminster generate a greater rate of growth than in
the green light. council launched a 20-year, £1.2 the wider area.
5LOWER LEA VALLEY a relative discount when compared to The current timeframe is for this to be
neighbouring localities. Looking along complete by 2022.
Royal Docks within the Lower
the Jubilee line, average re-sale prices in
Lea Valley area was identified as
a hotspot in 2015. It remains a
West Ham are the lowest compared to all HACKNEY WICK
other stations in zones 1 and 2. CURRENT PRICING: £700PSF
development opportunity area,
alongside three other localities 2021 FORECAST: £850 PSF
within the wider Leamouth area:
LEYTON
WEST HAM CURRENT PRICING: £675 PSF
CURRENT PRICING: £700 PSF 2021 FORECAST: £800 PSF Situated on the edge of the Olympic
2021 FORECAST: £950 PSF Park and just four miles north of the
City of London, Hackney Wick is
benefitting from public sector-led
Leyton sits on the edge of an area that regeneration overseen by the London
has undergone considerable change, Legacy Development Corporation.
West Ham station was recently
with the development of Westfield, Plans are in place to create a new
rezoned by TfL from Zone 3 to Zone
Stratford International Station and neighbourhood with thousands of
2/3, a move which saves commuters
the Queen Elizabeth Olympic Park all new homes, live-work dwellings,
travelling into central London several
nearby. The local council has identified workshops and small business
hundred pounds a year in ticket
Leyton as a priority growth area within premises, further enhancing the offer
fares. Transport options from this
Waltham Forest, with plans to create for creative industries which have
area also include the Jubilee, District, sprung up in the canal-side area. In
a new community to the west and
Hammersmith & City, Overground and addition, the overground train station,
south of the town centre. As part of
DLR lines, along with Crossrail running this, there are proposals to build new which connects the area with Canary
from Stratford from 2019, making it one homes, primary schools, health and Wharf and the West End is undergoing
of the best-connected transport hubs in public facilities, as well as making a £25 million facelift to help improve
East London. Despite the strong price improvements to road and rail access, accessibility. We expect this ongoing
growth seen in this area over the last resulting in better connections into regeneration will have a positive impact
three years, average prices still offer the Queen Elizabeth Olympic Park. on pricing in the coming years.
EXISTING HOTSPOTS, AND AREAS TO WATCH
As noted earlier in the report, some some levels of growth, they are now
areas in our hotspots are included expected to move more in line with
24,201
for the second or even third time, as the market.
there is still anticipation of some future
However, there will still be some
outperformance. A few of these areas
opportunities for outperformance,
have not seen the full level of growth
new private housing starts previously predicted between 2015 and
for example in Acton, with the opening
in 2016 (20+ units) 2018 given the changing dynamics of
of Crossrail, and the Canary Wharf
the market, but may now see this growth Estate as the new residential district
over a longer time-frame. becomes established. Other areas
to watch are Whitechapel and the
In the case of Earl’s Court, the scale of Olympic Park. The level of growth
the forecast uplift is dependent on the seen in the last two years are behind
commencement of development work. those forecast in 2015, but there is
In recent years, the estimated average likely some additional level of price
value in Earl’s Court for best-in-class outperformance to come. Euston is
development has risen to £1,650 psf,
another area to watch. Development
but this could reach £2,100 by 2021,
plans have been pushed back
as long as comprehensive development
several times but, once agreement
starts on the Earl’s Court Masterplan.
is reached, there will be a complete
Other previous hotspots do not make overhaul of the station, which will be
the 2017 list as, having registered felt in the surrounding areas.
6HOTSPOTS 2018 RESIDENTIAL RESEARCH
MARKET UPDATE
The development market in London offer at least 35% Affordable Housing expected. This report highlights some
has not only been affected by when submitting schemes for planning locations where a variety of factors
the tax and policy changes which approval. This change has led to some have the potential to deliver above-
have had an impact on the whole developers having to reassess their market performance, but this assumes
housing market, but also specific development economics and has, in best-in-class development.
factors such as rising development some cases, slowed down the process
costs, changing land values and the of development. FIGURE 3
availability of development funding,
Certainly the level of development across
RESIDENTIAL DEVELOPMENT
especially for smaller developers.
the capital has dipped since 2015,
LAND PRICES
Residential development land prices with 24,201 new private housing starts 120
in prime central London are now 13% on schemes of more than 20 units in PCL
lower than two years ago, although 2016, down from nearly 34,000 in 2015, Greater London*
price declines have largely abated according to data from Molior. 110
this year.
Financing is also a factor at play here,
Index 100=Q1 2015
Average land prices in the wider with rising costs for materials and, for
100
London market, based on a small some developers, funding. In other
basket of sites around the capital, cases, accessing funding is becoming
are largely flat on the year. more challenging. The weakness of
sterling is proving a draw for overseas 90
The increased focus on affordability,
developers however.
and the drive towards the provision
of more Affordable Housing, which There is still a strong need for housing
80
is to be welcomed, has led to in the capital as employment continues
Sep-15
Dec-15
Sep-16
Dec-16
Mar-16
Mar-17
Jun-15
Jun-16
Jun-17
new policy around planning, with to rise. In such an environment however,
the Mayor of London pledging to all the fundamentals need to be aligned
speed up the process for those who before market outperformance can be Source: Knight Frank Research *indicative
FIGURE 4
LONDON ANNUAL PRICE GROWTH OCT 2016 - OCT 2017
ENFIELD
BARNET
HARROW
HARINGEY WALTHAM
HILLINGDON FOREST REDBRIDGE
HAVERING
ISLIN
BRENT HACKNEY
CAMDEN
GTO
BARKING &
DAGENHAM
>7%
N
TOWER NEWHAM
EALING CW CL HAMLETS
5%-7%
KC
SOU
3%-5% GREENWICH
HF
THW
HOUNSLOW
0%-3%
LAMB
ARK
BEXLEYRESIDENTIAL RESEARCH
Gráinne Gilmore
Head of UK Residential Research
METHODOLOGY: +44 20 7861 5102
grainne.gilmore@knightfrank.com
In our analysis, we had regard for residential developers to enter
for demographic and economic the market and undertake significant Oliver Knight
Associate
forecasts – but the critical elements schemes over the next five years.
+44 20 7861 5134
in our assessment have been the Working with our London Residential
oliver.knight@knightfrank.com
factors which are likely to lead to the Development land and new homes
dynamics of a particular market area teams we have determined a final
RESIDENTIAL DEVELOPMENT
meaningfully changing over time. short-list of ‘hotspots’ across
We have looked closely at new and London where we believe there is Justin Gaze
proposed transport infrastructure, (a) scope for development activity, Joint Head of Residential Development
+44 20 7861 5407
the spread of gentrification as (b) an underlying market undergoing
justin.gaze@knightfrank.com
well as current and potential improvements due to infrastructure
pricing. Critically we have also investment or sociodemographic Ian Marris
concentrated on areas where there shifts and (c) potential for price Joint Head of Residential Development
+44 20 7861 5404
is a real opportunity, through either outperformance over the next
ian.marris@knightfrank.com
refurbishment or redevelopment, few years.
Rupert Dawes
Head of New Home Sales
+44 20 7861 5445
We are not underestimating the risks to the property market posed by the wider economic and geopolitical rupert.dawes@knightfrank.com
landscape. These are considered in our quarterly forecast and risk monitor, and we recognise that any
James Mannix
dramatic changes in the current market conditions could impact on pricing. However, our analysis indicates
Head of Residential Capital Markets
that, at this point in time, the areas identified in this report offer the opportunity for outperformance compared
+44 20 7861 5412
to the wider market. The prices refer to average new-build pricing. In some less established markets, this will
james.mannix@knightfrank.com
be a theoretical price.
Charlie Hart
Head of City and East Development
+44 20 7718 5222
charlie.hart@knightfrank.com
Abigail Heyworth
Partner, Residential Development
+44 20 7861 5414
Knight Frank Residential Research provides strategic advice, consultancy services and forecasting abigail.heyworth@knightfrank.com
to a wide range of clients worldwide including developers, investors, funding organisations,
James Keegan
corporate institutions and the public sector. All our clients recognise the need for expert independent
Partner, Residential Development
advice customised to their specific needs.
+44 20 7861 5481
james.keegan@knightfrank.com
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PRIME CENTRAL UK RESIDENTIAL
LONDON SALES INDEX LONDON RENTAL INDEX MARKET FORECAST
The prime central London sales index is based on
PRICES STAY FLAT IN PRIME This report analyses the performance of single-unit RENTAL VALUE GROWTH BOTTOMS Headlines Dec 2017 UK HOUSE PRICE FORECAST
OUT AS GROWTH IN SUPPLY EASES
FOCUS ON:
repeat valuations of second-hand stock and does
CENTRAL LONDON AS DEAL
rental properties in the second-hand prime central
not include new-build property, although units from London market between £500 and £5,000-plus per
completed developments are included over time. week. For an analysis of the build-to-rent market
UK house price growth has been UK house price growth has moderated from recent peaks, although
VOLUMES RISE
EASTERN
PARSONSREVIEW
and the institutional private rented sector in London slowing since the summer of 2014, markets remain highly localised.
and the rest of the UK, please see our Private Demand is strong in the upper and lower price brackets but demand from
although the annual change
GREEN
Rented Sector Update report here.
senior executives has slowed, says Tom Bill
remains positive
Knight Frank data suggests the price falls seen in 2016 are unlikely to be The momentum in house price growth is observed in the prime housing markets in
repeated this year, says Tom Bill slowing in many parts of the country, and London and beyond are set to continue,
March 2017 Rental value declines continued to bottom out Below £1000 per week activity is particularly Price growth across the UK is expected
to be 1.0% in 2018, reaching 14.2%
we expect price rises to remain muted
overall next year amid increased economic
and we explore this more fully in our blog.
RESIDENTIAL DEVELOPMENT IN CANARY WHARF,
2016
in March as the rate of increase of new lettings strong, as shown in the relative rental value The UK may now be entering a period of
June 2017 Prices were flat in prime central London for
the second consecutive month in June, a
the second highest figure since June 2015,
the LonRes figure fell back to 249 in May,
Annual rental value growth eased to properties coming onto the market slowed. declines in figure 3 on page 2. Demand has
been bolstered by continued strong demand
cumulatively between 2018 and 2022 and political uncertainty in the run-up to interest rate rises, but even so, we expect ROYAL DOCKS AND QUEEN ELIZABETH OLYMPIC PARK
-4.9% as the rate of growth of new supply Brexit and amid more muted forecasts for rates to be low compared to long-term
Prices were flat in June for the second
consecutive month
trend that provides further evidence that the
price falls seen in 2016 are unlikely to be
suggesting a degree of caution ahead of the slowed
The annual rate of growth eased to -4.9% and
the quarterly rate of decline was -0.7%, which
from students, a greater acceptance of renting
as a tenure model by young professionals
In London, prices are forecast to fall by
wage growth. The market is localised and norms by the end of the forecast period. 2017/18
general election. was the lowest level since November 2015. we see slightly stronger growth in the While development levels are rising across
repeated this year. and the fact some corporate accommodation 0.5% in 2018, but cumulative price
The number of new tenancies agreed Midlands, East of England and the North the country, the shortage of new homes is
While there was an element of hesitation The amount of lettings property coming onto budgets have been cut, increasing demand in growth over the next five years is
The quarterly decline of -0.3% was the Despite flat pricing in the past two months, was 22% higher year-on-year in the six West, a continuation of the trend that has unlikely to be fully reversed in the coming
ahead of the vote on 8 June, anecdotal the market in prime central London has risen lower price brackets positive at 13.1%
lowest three-month fall recorded on an annual basis prices fell 6.3% in the months to February emerged this year. years, and that will underpin pricing.
evidence suggests activity has been relatively over the last 12 months as uncertainty grew
since early 2016 12 months to the end of June. Meanwhile, Demand is slower between £3,000 and Once the Brexit deal is completed, we
over pricing in the sales market following a On the other hand, factors such as
the quarterly figure of -0.3% was the lowest healthy in the period following the election, £5,000 per week, a market where demand
Annual rental value growth was -1.2% succession of tax hikes. This was compounded forecast rising momentum across the deepening affordability pressures and
quarterly fall recorded since early 2016. in particular as a greater degree of flexibility has traditionally been strong among senior
between £250 and £500 per week by political uncertainty surrounding the EU market, with price growth reflecting this in property taxes, will continue to weigh
The number of exchanges recorded emerges in relation to asking prices. executives in financial services. A recent
In terms of market activity, Knight Frank data referendum. many locations. The variations currently on pricing.
between January and May was 14.2% series of news stories about banks cutting
higher than 2016 confirms an improvement compared to last Furthermore, leading indicators of demand Average prime gross yield was 3.26% While the annual increase in new lettings staff bonuses underlines the ongoing financial
year, aided by the pricing adjustment that has suggest the number of transactions will in March properties on the market was 51% last June, pressures they face.
taken place over the last two and a half years 2017-2022 Forecasts, December 2017
continue to strengthen in the second half of this figure had eased to 23% in February.
Annual price falls in June were -6.3%, as buyers and sellers adapt to higher rates of It means landlords at this price point frequently
compared to -6.6% in May 2017. Macroview: The implications of weak In a sign that demand is increasing, the have to make double-digit percentage 2017 2018 2019 2020 2021 2022 2018 - 2022
stamp duty.
The number of new prospective buyers
sterling number of new prospective tenants registering reductions to asking rents to prevent void Mainstream residential sales markets
The number of exchanges in prime central rose 1.5% year-on-year in the six months to periods. UK 1.5% 1.0% 2.0% 3.0% 3.5% 4.0% 14.2%
Macroview: Brexit and euro clearing London recorded between January and May registering with Knight Frank was 15% higher
February. Meanwhile, the number of tenancies
in the first five months of the year compared Meanwhile, demand in the super-prime lettings London -1.0% -0.5% 2.5% 3.0% 3.5% 4.0% 13.1%
was 14.2% and 8.7% higher respectively agreed increased by 22% over the same
to 2016 and the figure was 6% up on 2015. market above £5,000-plus per week remains North East 2.0% 2.0% 2.0% 4.0% 3.0% 3.0% 14.8%
than the same period in 2016 and 2015. period.
robust. There were twice as many deals done
Meanwhile, viewing levels were up by a fifth North West 2.0% 1.0% 2.0% 4.0% 4.0% 4.5% 16.4%
However, LonRes transaction data underlines While this indicates a marked increase in activity above £5,000 per week in the first two months
some of the near-term challenges faced by compared to last year and the amount of Yorks & Humber 0.5% 1.0% 2.0% 3.0% 3.0% 3.0% 12.6%
in the prime central London lettings market, on 2017 compared to last year, LonRes data
the market. Sales volumes between January stock under offer was up by 36%, suggesting demand levels vary at different price points. shows. East Midlands 4.5% 2.0% 2.5% 2.5% 3.0% 3.5% 14.2%
and May 2017 were flat compared to 2016. the future flow of exchanges will remain
West Midlands 4.5% 2.0% 2.0% 3.0% 3.0% 4.0% 14.8%
After registering 323 sales in April, which was strong. FIGURE 2
FIGURE 1 Methodology Statement: East 1.0% 2.0% 3.0% 3.0% 4.0% 3.0% 15.9%
Demand is on the rise Rental value declines bottom out House price forecasts are based upon time series
Year-on-year change, six months to February regression analysis of relevant statistically significant South East 3.0% 0.0% 2.0% 3.0% 4.0% 4.5% 14.2%
FIGURE 1 FIGURE 2
macro-economic variables adjusted in-house to
Price growth in prime central London Demand indicators are on the rise encompass externalities such as likely risk factors.
South West 4.0% 1.0% 2.0% 2.5% 3.5% 4.5% 14.2%
12-month change
TOM BILL
The forecast uses the Nationwide House Price Index
Jan-May 2017 vs Jan-May 2016 6-month change Wales 1.5% 1.5% 1.5% 2.5% 3.0% 4.0% 13.1%
Head of London 2%
12-month change Quarterly change TOM BILL 2%
Quarterly change
as a base. Our forecasts assume a Brexit deal, but
with a two year transitional period.
6-month change Monthly change Head of London 22% 1% Monthly change Scotland 1.5% 1.0% 1.0% 2.5% 3.5% 3.5% 12.0%
Residential Research 1% Residential Research
0% Prime residential sales markets
0% 36%
15% -1%
“Anecdotal evidence suggests -1% “There were twice as many 11%
Prime central London east 0.0% 0.5% 1.5% 2.5% 3.0% 5.0% 13.1%
activity has been relatively deals done above £5,000-
-2%
-2%
Prime central London west 0.0% 0.5% 1.5% 3.5% 3.0% 3.5% 12.6%
plus per week in the first two “The market is localised and
healthy in the period following -3% 19%
-3%
Prime outer London -1.0% 0.0% 1.0% 3.0% 3.5% 4.5% 12.5%
months on 2017 compared to we see slightly stronger
the election, in particular as 15% 14% 2%
-4%
Prime England & Wales 0.7% 1.5% 2.0% 2.0% 2.0% 2.0% 9.9%
a greater degree of flexibility
-4%
last year” -5%
growth in the Midlands,
emerges in relation to asking
-5% East of England and the Residential rental markets
Instructions
Tenancies
Agreed
New
Applicants
Applicant
Viewings
Follow Tom at @TomBill_KF -6%
prices”
-6% North West, a continuation UK 1.2% 2.5% 2.5% 2.5% 3.0% 3.0% 14.0%
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
-7% of the trend that has
New
Applicants
Stock Under
Offer
Viewings
Exchanges
London 0.7% 3.0% 2.5% 3.0% 3.0% 3.0% 15.0%
Follow Tom at @TomBill_KF For the latest news, views and analysis
emerged this year.”
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
on the world of prime property, visit Prime central London -1.5% 0.5% 1.5% 2.5% 3.0% 3.0% 11.0%
For the latest news, views and analysis Global Briefing or @kfglobalbrief Source: Knight Frank Research Source: Knight Frank Research
For the latest news, views and analysis Prime outer London -3.5% -1.0% 1.0% 2.0% 2.5% 3.0% 8.0%
on the world of prime property, visit
on the world of prime property, visit
Global Briefing or @kfglobalbrief Source: Knight Frank Research Source: Knight Frank Research
our blog or @kfintelligence
Source: Knight Frank Research
NB. Price forecasts are for existing homes. Property values in the new-build market may perform differently.
MARKET UPDATE DEVELOPMENT TRANSPORT
Prime Central London Prime Central London UK Housing Market Eastern Review
Sales Index - Nov 2017 Rental Index - Nov 2017 Forecast - Dec 2017 2017/18
Important Notice
RESIDENTIAL RESEARCH
DEVELOPMENT CONSULTANCY RESIDENTIAL RESEARCH
RESIDENTIAL RESEARCH
RESIDENTIAL DEVELOPMENT
© Knight Frank LLP 2018 – This report is published
LAND INDEX
for general information only and not to be relied upon in
LONDON DEVELOPMENT LAND VALUES
CROSSRAIL DEVELOPMENT LONDON
REMAIN STEADY IN Q3
The average value of English greenfield development land was
any way. Although high standards have been used in
DESIGN STUDY RESIDENTIAL
unchanged in Q3, as was the value of prime central London
the preparation of the information, analysis, views and
ANALYSING PROPERTY MARKET PERFORMANCE development land. Urban brownfield site values slipped slightly
over the quarter, but on an annual basis are still outperforming.
ALONG THE ELIZABETH LINE 2017
REVIEW
SPRING 2017 Key facts Q3 2017 English greenfield land values were up
1.1% year-on-year in Q3, the second
In general, the prime central London land
market is showing signs of stabilising
Greenfield land prices were unchanged consecutive quarter they have been in after a period of deflation and this trend
projections presented in this report, no responsibility or
in Q3, taking the annual rise in prices to positive territory after two years’ of is expected to continue over the next
12 months. Ian Marris, Joint Head of
AUTUMN 2017
1.1%, the biggest rise in more than modest declines in pricing. There is
two years now a steadier supply of greenfield Residential Development, said: “The liquidity
development land in many parts of the in the land market is low as sentiment is
market. This is likely to keep pricing level nervous however for the brave there is
There was no change in average prime value to be found. Deals are price sensitive
overall in the coming year, although there
liability whatsoever can be accepted by Knight Frank LLP
central London land prices in Q3, with and risk needs to be appropriately analysed
is still potential for outperformance in
a 2.5% annual decline, the most and understood.”
some areas where sites are oven-ready
modest fall in prices since Q3 2015
and have access to good infrastructure. There are challenges for developers trying
to secure debt and equity funding, and
In urban areas, the continued price
Urban brownfield sites slipped on development economics must also account
growth in the urban brownfield land
average by 0.2%, taking the annual for the fact that there is, so far, little sign
for any loss or damage resultant from any use of, reliance
index reflects continued demand in
change in values to 6.1% of any significant softening in construction
these markets (which can also be seen
costs. The weaker pound is boosting import
in the growth in house prices). While this prices, while the lack of resource in the
sustained demand will likely continue to labour market is also a key consideration for
underpin pricing, average land values developers currently active in the market.
remained broadly flat in Q3, suggesting
on or reference to the contents of this document. As a
that pricing in some urban markets may “This is a market for the experienced who
have found its equilibrium. know and understand how to extract value
in uncertain times. That said, we believe
In prime central London, the decline in there is opportunity for investors who will
development land values shows continued be building out into a market, which,
signs of abating, with values down just over the next few years, looks to be
general report, this material does not necessarily represent
2.5% on the year, compared to a 10.3% extremely limited in respect of new supply,”
decline seen in Q3 last year. Mr Marris added.
FIGURE 1 FIGURE 2
Residential development land prices Annual change in average land values
the view of Knight Frank LLP in relation to particular
160
England Greenfield 15% England Greenfield
Prime Central London Prime Central London
Urban Brownfield Urban Brownfield
10%
140
5%
Index
properties or projects. Reproduction of this report in whole
120 0%
-5%
GRÁINNE GILMORE 100
Head of UK Residential Research -10%
Follow Gráinne at @ggilmorekf -15%
80
Sep-17
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
or in part is not allowed without prior written approval of
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Jun-17
Sep-17
Jun-17
For the latest news, views and analysis
on the world of prime property, visit
HOW HAVE PRICES LOOKING TO THE FUTURE: DEVELOPMENT Global Briefing or @kfglobalbrief Source: Knight Frank Research Source: Knight Frank Research
PERFORMED? THE DEMAND RECOVERY THE THREE-TIER LETTINGS MARKET BREXIT AND FINANCIAL SERVICES
CROSSRAIL 2 PIPELINE
Knight Frank LLP to the form and content within which it
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