East London is highest performing area in London for residential property

East London boroughs are among the highest performers for both historic and potential future house price growth, according to a new borough by borough analysis of the residential housing market in the capital.

In addition, demand for private rental housing, particularly in central London, contributes to positive forecasts for rental growth across London, according to the research from real estate form CBRE.

According to Jennet Siebrits, UK head of residential research at CBRE, it demonstrates the breadth of the London housing market. ‘Residential property in London reflects the city’s diverse demographics and budgets; from properties for first time buyers, family homes, high end properties and an expanding private rental sector,’ she said.

Mark Collins, UK chairman of residential at CBRE, pointed out that London remains an attractive city for people from outside the UK for work and study. ‘It also draws people in from around the UK. Following a period of low growth and a dip in transaction volume, owner-occupiers and investors understand that they can find good value in London property, and that it’s still a great place to live,’ he said.

According to the report the average house price in London is £460,000, although this masks a wide range across the different boroughs. Barking and Dagenham had the lowest average house price of £297,039, while Kensington and Chelsea has the highest average house price of £1,250,926.

East London boroughs have experienced the strongest long-term house price growth in recent years and have among the lowest house prices. Leading the way is Barking and Dagenham, with 51% house price growth over five years, which is more than 2.5 times greater than the London figure of 19.5%.

This is followed by Newham at 49%, Waltham Forest at 44%, Bexley at 42%, Redbridge at 41% and Havering at 40%.

‘East London’s success is down to a confluence of different elements, including the maturing of Canary Wharf, the opportunities presented by derelict industrial sites, local authorities’ support for regeneration, improved infrastructure, and the stimulus provided by the 2012 Olympics. And that meant East London was primed for the emerging tech industry to grow into, and so London’s commercial centre has spread eastwards,’ said Siebrits.

‘Regeneration may have smoothed east London’s rough edges, but it also drew in new residents who helped embed its cool reputation such as tech workers and creatives, and younger demographics drawn by the lifestyle, as well as seeking competitive house prices and rents,’ she added.

Meanwhile, in the central London boroughs of Lambeth and Southwark, house price growth over the last five years outperformed London, with 17% and 14% growth respectively. Both boroughs are south of the river, and Lambeth is the location of one of inner London’s largest regeneration projects at Vauxhall, Nine Elms and Battersea.
‘The London sales market has been cooling over the last three years, with both price growth and transactions softening. However, there are tentative signs that the trend has reached a plateau,’ Siebrits explained, adding that London house prices have increased by 19.5% over the last five years, and CBRE forecasts prices to grow by 10% over the next five years.

The report also shows that average rents have increased by 10% in London over the last five five years, and CBRE forecasts this rate of growth to accelerate to 18% over the next five years.

Bexley has the lowest average monthly rent for a two bedroom property at £1,100 per calendar month, which compares favourably against the London average of £1,900. Also in east London, the borough of Havering, where average monthly rents are £1,125, has the second lowest average rents.

‘The rental market in London is buoyant. Increasing wage growth and employment growth is boosting tenant demand. The Build to Rent sector, also referred to as multifamily housing, is delivering significant numbers of new homes. There were 13,500 build to rent units under construction as at the end of the second quarter of 2019, a five-fold increase compared with five years ago,’ said Siebrits.

‘Tenants generally enjoy a better standard of rental accommodation in professionally-managed blocks of new apartments, and that is expected to put more pressure on private landlords with older stock to make improvements to their properties and tenant services. However, even with the build to rent boom, London is still facing a housing supply shortfall. Consequently, as the supply of rental homes is not keeping up with demand, we expect average rents to rise,’ she pointed out.

The City has the highest rents in CBRE’s study, with an average of £5,600 per month for a two bedroom property, reflecting luxury new stock in the area. Rental values have increased by 33% over the last five years and are forecast to grow by 20% over the next five.

‘The desire to live in the heart of the action in the City of London is part of a trend we see around the world, where there is increasing urbanisation and population growth in major cities. It means landlords and local authorities increasingly must think about city centres as places to work, socialise and live, with the onus shifting from commercial uses to a more mixed landscape,’ Siebrits concluded.