The five year outlook for London is positive. The markets show clear signs of sustained recovery, with mortgage transactions and approvals up from a year ago.

In the east of City, while the financial sector remains the dominant industry, employees working in the professional, scientific and tech industry have increased by a third over the past five years to be the second biggest employment group. The momentum in this industry is forecast to continue to grow by a further 22.6% over the next five years compared to just 2.4% in the financial industry, according to Oxford Economics.

As employment in Canary Wharf becomes more varied, we expect a similar trend in our buyers and tenants, resulting in demand for properties coming from a wider pool.

Development pipeline

The supply of new homes across London is falling significantly short of overall requirements. In the east of City markets, this has been an important driver of growth in the past year as the supply pipeline of completed stock in Canary Wharf dried up, but demand for new build properties has been strong, as demonstrated by the strong off-plan sales seen in some key developments.

We expect this supply and demand imbalance to continue to push prices up in the medium term. Yet even with the large pipeline in east London, the shortfall of homes across London will remain, perhaps encouraging buyers who wouldn’t have previously considered the east of City markets to move to the area.

The rental market

Across the UK, the private rented sector grew by some two million households in the decade to 2011. Over the past few years, the government has introduced several initiatives to support home ownership, most notably the Help to Buy scheme.

Despite this, we expect the private rented sector to grow by a further one million households in the next five years to 5.8 million households.

This increase in demand in the private rented sector has not been met with a similar increase in the supply of rental properties. In the east of City markets, the lower value rental supply is likely to remain constrained, but less so in the more valuable markets which is where new activity is concentrated. As this supply increases, we believe it will be met with demand resulting in an active rental market.

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