The total value of residential property in eastern boroughs of central London has grown faster than any other area of the capital, according to new research.
Since the liberalisation of planning laws in 1987, the total value of homes in Hackney has risen by 864%, the fastest of any London borough. This is followed by Tower Hamlets and Southwark, with increases of 684% and 668% respectively, since the same year which also saw the opening of City Airport and the Docklands Light Railway.
Beaten into fourth place, Kensington and Chelsea has seen its residential property increase in value by just 661% since 1987 and the gains compare with453% for the whole of Greater London in gross property value over the same period.
The research from specialist London estate agents Stirling Ackroyd shows overall that the value of all residential property in Greater London stands at £1.51 trillion, as of June 2014. This compares to just £273 billion in 1987. Moreover, Stirling Ackroyd forecast the value of London property is set to reach £2.01 trillion by the middle of 2017.
‘Since the reforms and investment that started almost 30 years ago, London has rebuilt its place at the centre of the financial, cultural and technological worlds,’ said Andrew Bridges, managing director of Stirling Ackroyd.
‘At the time, the 1987 Town and Country Planning Order hardly seemed revolutionary but this apparently dry document has proved profoundly effective. Hackney Council embraced the liberalisation of changes of use with particular gusto, at first through a desperate need for income, and later in a more organised way as the benefits became clear and that is how Hackney, an unlikely candidate at the time, has led the London property market,’ he explained.
‘Just as a potent economic force is sweeping away old-fashioned views about particular boroughs, this is hand in hand with a more subtle, cultural shift. Londoners are increasingly looking forwards, turning their backs on the decline that dominated much of the twentieth century,’ he added.
In absolute terms, residential property in Hackney was worth just £6 billion in 1987, rising to £57.8 billion as of June 2014, and set to reach £80 billion by the middle of 2017 according to Stirling Ackroyd forecasts. Similarly the value of all homes in Tower Hamlets was £6.2 billion in 1987, £48.5 billion in 2014, and is set to reach £71 billion by 2017.
By contrast, residential property in Kensington and Chelsea was already extremely valuable in 1987, worth a total of £13.4 billion, rising to £102.1 billion in June 2014 and potentially reaching £138 billion by 2017. Meanwhile, Westminster remains the most valuable borough in absolute terms, with gross housing wealth of £102.7 billion.
‘Old hotspots like Kensington or Westminster remain enormously valuable. But now London is looking east. As the capital’s economic and cultural heart grows outwards and eastwards, the City fringes are demonstrating the greatest dynamism,’ said Bridges.
‘Today’s best opportunities exist because of an intricate pattern of new working and living spaces, which only a flexible approach to property uses can allow. Development sites still exist in great numbers around the City of London, and are allowing a growing stock of all types of property,’ he pointed out.
‘What matters most for successful neighbourhoods is a willingness to grasp new opportunities. Investment in infrastructure is needed along the way, as we’ve seen with the DLR and the London Overground. But above all, planning rules that embrace change have been the biggest factor in the creation of new ideas and new wealth,’ he added.
Of all London boroughs, Hackney has seen the fastest individual house price rises, since 1987 saw the opening up of the local residential market. The value of an average home in Hackney now stands at £545,000 as of June 2014. This is 583% more than Hackney’s average residential property price of £79,700 in 1987. By the middle of 2017 Stirling Ackroyd research suggests a home in Hackney could cost on average £723,000, or 807% more than thirty years before in 1987.
Second in terms of price growth is Kensington and Chelsea, with the average home now worth 549% more than in 1987. The average home was worth £1,284,000 in the middle of 2014, compared to £198,000 in 1987.
‘Price growth has been sharpest for homes on the threshold of London’s future in boroughs like Hackney or Tower Hamlets that in 1987 were just the backdoor to the city. Creative industries, from the arts to technology, are still shifting London’s centre of gravity dramatically eastwards,’ said Bridges.
Across Greater London, property prices have increased by an average of 345% since 1987 from £98,700 in 1987 to the current price of £440,000, as of June 2014. By June 2017, the average London home is set to cost £584,000, up 491% over the course of thirty years.
Every borough of London has seen residential property prices rise by more than inflation over this timeframe. Even after inflation, the average home in Hackney is now worth 431% more than in 1987, while Kensington and Chelsea has seen real terms price rises of 398% over the same period.
Bridges also explained that to keep up with price growth, real progress must also address capacity and this is a growing challenge. ‘At the start of the 1980s London’s population had returned to the level of the Edwardian era at under seven million. So for the last 30 years traditional approaches to housing new waves of residents were enough. But now we are in uncharted territory once again, fast approaching a new record number of Londoners within the next three years,’ he said.
The research also shows that growth in the number of homes in London has been led by eastern, central boroughs. Tower Hamlets, Newham and Hackney have seen increases of 85%, 44% and 41% respectively in the number of residential properties since 1987. This is followed by Southwark, up 37%, and Islington, with a 34% increase in the number of local homes.
Across the capital, this corresponds to 24% growth in the number of household units since 1987, now totalling 3.4 million homes, as of 2014. This corresponds to an average density of 2,186 properties per square kilometre.
Since 1987, the population of Greater London has grown by 26% or 1.78 million new residents. This brings the capital’s population to 8.6 million people, as of June 2014. Such growth is set to continue with 400,000 new residents projected to take London’s population to a new all-time record of nine million by the middle of 2017.
This means each of the 32 London boroughs will need to supply homes for an average of 12,500 new residents over the next three years or more than 100 new homes for every single square kilometre of Greater London.
‘Finding sites for new homes is a vital part of stimulating prosperity and thanks to open-minded planning rules, some boroughs have done a better job of this than others. But conversions from one use to another are just as critical in providing the most useful, often the most valuable, types of property,’ said Bridges.
‘This is the flexibility that allowed the development of Shoreditch as an artistic centre in the early 1990s. Mixed-use spaces allowed a working and living community of like-minded people, where before there were only dilapidated warehouses. Today the same principle of flexibility and variety is allowing Tech City to flourish, providing thousands of new homes in the Olympic Park and letting the rest of Southwark follow the glittering example of the Southbank. To let this happen policy makers need to help find the space, in a literal sense, for future economic growth,’ he added.
As of June 2014, the average size of a London household was 2.49 people per home, up from an average of 2.44 people per household in 1987. However changes have varied considerably across the capital. The fastest increase in the size of households has been in Newham, up 13% to average 3.04 people per household, the only borough where average households consist of more than three people.
By contrast, neighbouring Tower Hamlets has seen the second fastest drop in average household size, down 4%, after Havering which saw households shrink by 5%. Households in Tower Hamlets are now made up of an average of 2.51 people, compared to 2.61 people in 1987.
‘London has become more tightly packed as a whole, illustrating the need for even more new homes. But within this picture, the capital has witnessed a growing diversity of households. Wealthy professionals in places like Tower Hamlets and Chelsea have led to smaller households in these areas, and we’ve seen this change reflected in the average number of bedrooms in new build developments,’ said Bridges.
‘Elsewhere, as new industries grow, waves of young professionals have moved as close as possible to central boroughs. In places like Hammersmith, Camden and Wandsworth, the growing number of people per home is due to more professional flat sharers. Particularly further out, the flat sharing trend has combined with growing families since 1987, with Newham and surrounding neighbourhoods seeing the biggest increase in the size of households,’ he added.