Across the prime housing markets of Canary Wharf and Wapping, average values increased by 4.4% over the first quarter of 2014, bringing the total growth in the past year to 17.2%. This is higher than the 13.1% annual growth recorded across the wider prime London markets.

However, since the credit crunch, price growth in the east of City has not been as strong as other areas of prime London, tending to track the wider London average. Average values are 28.5% above their 2007 peak, compared to 36.2% across all prime London.

Yet these figures mask a significant divergence between the housing markets in Canary Wharf and Wapping. In Canary Wharf, high levels of new supply in the years following the credit crunch kept price growth low until 2013 when the supply of completed stock dried up. Now average values remain just 11.6% above their 2007 peak, although there is significant variation between the developments. Conversely, in Wapping the converted warehouses are in limited supply and strong demand has meant that prices are now 41.4% above their 2007 peak.

In the prime rental market, the east of City saw the strongest rental growth across all prime London over the past year due to uncharacteristically low levels of stock. In contrast to the sales market, Canary Wharf, where student and sharer demand is more dominant, has seen stronger prime rental growth since the peak of the market than Wapping.

Increased demand

During the downturn, the east of City markets were heavily dependent on a relatively small pool of domestic buyers who were buying properties as their main residence. This occurred at a time when employment and earnings in the financial centre were under pressure.

While buyers purchasing their main residence remain the dominant buyer group, since 2010 investors have been returning to the area both from overseas and the UK. However, they tend to focus on Canary Wharf, accounting for 27% of buyers in 2013/14 compared to 21% in Wapping due to the nature of stock and familiarity of the area.

Investor behaviour in the east of City markets is different to that in the core areas of prime central London (PCL). Buyers have been concentrating on lower value stock predominantly for income yield as much as a store of wealth. In the east of City, gross yields currently average 4.5% compared to PCL where they average 3.0% and rarely exceed 4.0%.

Canary Wharf attracts more international buyers than Wapping, accounting for 41% of all sales in 2013. However, this is much less than in 2012 when overseas buyers accounted for 74%. This is not due to a significant fall in international interest but an increase in domestic activity which has been rising steadily with the economy.

Over the first quarter of 2014, the number of international buyers has increased from 2013 levels, and is broadly on par with levels seen in 2012. This changing trend between the dominance of international or domestic buyers continues to highlight the attraction of the area to many different nationalities.

International tenants in the east of City consistently account for over half the rental market. The majority of tenants renting here have been relocated for employment reasons. Given Canary Wharf is a key financial hub, it is no surprise that the 62% of tenants are employed in the financial and insurance sector.

East of City buying trends

Prime properties in the east of City are increasingly attracting younger buyers, particularly when compared to other prime locations. In 2013, 18% of buyers in these markets were under 30 years old, three times that of prime central London.

This highlights the increasing numbers of first time buyers in the east. Wapping saw the highest proportion of first time buyers across all prime London, joint with Clapham at 24% of buyers, Canary Wharf followed in a close second place.

Taken from
Spotlight: East of City Residential Market - Spring 2014