High end residential development and values in the City of London are booming and catching up with the West End but Docklands is lagging behind, according to a new analysis.
The City has become a hub for new residential towers and new homes in both the West End and City enjoy a price premium not shared by the Docklands, according to the research from Beauchamp Estates.
The firm says that an analysis of new and second homes sales and pricing shows that London now has three very distinct finance driven residential markets.
It commissioned Dataloft to analyse data in the City of London residential market within postcodes EC1, EC2, EC3 and EC4, and then comparing this with the agency’s core market in London’s West End postcode W1 and also the Docklands residential market in E14.
Ranked by sales value, the first is in London’s West End, which is the address of choice for hedge funds, private family offices and private investors. The second is the City of London, home to the Bank of England and many leading corporations. The third is the Docklands, a rival to the City and home to many leading global banks.
The survey found that in the last three years there has been a surge in new residential development, sales and values in the City of London, particularly in the EC2 postcode which covers the Northern part of the City of London from Old Street to Bishopsgate, Aldergate and Threadneedle Street.
Since 2011 there has been a 17.2% increase in private stock in EC2, with 294 new build apartments completed between 2012 and 2014, compared with just 98 new units in the eight years previously.
The research found that there are an additional 1,096 new residential units currently in the development pipeline for the City of London, of which 295 are located within EC2. This can be compared to equivalent figures of 2,428 units in London’s West End and 15,901 units in the Docklands.
The average sales price of an apartment in the City of London (EC2) between June 2013 and May 2014 currently stands at £845,280, with 355 sales over this period. This can be compared to an equivalent average sales price of £1.4 million in the West End (W1), with 488 sales and an average of just £397,135 in the Docklands with 1,531 sales.
The firm says that new build developments achieve a strong price premium over second hand stock in both the West End and City of London housing markets, highlighting the potentially lucrative returns that can be achieved in both markets by developers.
In the West End average sales prices for newly built homes over the last 12 months were £1.6 million, compared to £1.4 million for second hand properties. Likewise in the City of London, new homes sales averaged £867,988, compared to £805,009 for second hand stock.
Beauchamp Estates say that the new homes price premium in the City of London underlines the luxury and quality of the homes being constructed there and highlight that prior to 2010 the City did not have an ultra-prime housing market, unlike the West End. It is only since 2010 that new homes values in the City of London have sold almost consistently each year at a premium to second hand stock. Back in 2007 a second hand home in the City averaged £520,000 compared to just £270,000 for a newly built home.
It also points out that since 2010 a number of flagship developments in the City of London have helped to enhance stock quality and raise values, helping the area catch up with the West End. The first in 2010 was Frobisher Crescent by United House, a nine storey building where properties sold at an average of £623,743. Another was a project in Leonard Street by London Square where properties sold in 2013 at an average of £646,500 and finally The Heron, a 47 storey skyscraper where sales have enjoyed an 11% premium over second hand properties sold over the same period.
In the development pipeline are a range of new medium rise projects. Across the whole of the City of London all schemes over 50 units take the form of 11 to 14 storey high developments.
In the Docklands, second hand property continues to sell at a premium to new build housing. Second hand homes average £405,711 compared to £341,026 for new build units. The firm says that this is because much of the new development in the Docklands is focused on starter and middle market stock and also because of the significant new homes supply; unlike the West End and City markets where the new homes market is smaller and the focus is increasingly on luxury and ultra-prime property.
‘There are now three distinct finance-drive residential markets in London, the West End, City and the Docklands. In terms of sales values and product quality the West End, which is our core market, remains numero uno. However the City of London is undergoing a development boom and values and product levels have begun to catch up with the West End,’ said Gary Hersham of Beauchamp Estates.
Three years ago Beauchamp Estates would never have taken an instruction in the City of London, there simply wasn’t the ultra-prime product or values that our clients seek. This has all changed and we are now acting on instructions in the City, an indicator to us of how much this market has changed and risen over the last three years,’ he added.