London’s centre of gravity is shifting to the east, with almost a third of all future homes in the capital set to emerge in the boroughs of Newham, Tower Hamlets, Greenwich and Barking and Dagenham over the next five years.

Based on our analysis of planning consents as well as market knowledge, Savills Research estimate that over 130,000 new homes should be built in London between 2014 and 2018, 29% of which will be based in just four boroughs East of the City. This includes many major schemes such as the recently permitted Wood Wharf (Canary Wharf Group) with 4,500 homes. Add to this Royal Wharf (Oxley Holdings) and Greenwich Peninsula over the river, and that’s a total of 17,885 homes with planning permission.

Transport improvements have been key in driving demand in previously overlooked parts of London. There is a discernible pattern of emerging development hugging the East London Line portion of the new London Overground. The extension of the network to Barking Riverside as well as the completion of Crossrail will provide a further boost.

Prices rises

Demand for homes in eastern postcodes is changing the shape of the London property market. While central boroughs such as Westminster and Kensington and Chelsea remain the most expensive, the areas which have experienced the biggest rise in value most recently are no longer at the core. Over the past year, the boroughs of Hackney, Tower Hamlets, Lewisham, Greenwich and Newham, have seen the biggest rises in house prices as buyers look further out for better value.

These boroughs have also recorded a dramatic increase in the number of transactions. The number of homes swapping hands in Tower Hamlets is now double its pre-peak average while deals in Newham have increased by almost 50% over the last 12 months.

A combination of these market trends and the higher specification of developments being delivered, means the value of new build properties in eastern postcodes is reaching new highs. Savills figures show that a new apartment in Canary Wharf can now command prices of between £700 and £1,200 psf. Values for new build in Stratford now lie between £550 and £750 psf while in Canning Town/Royal Docks prices are only slightly less at £500 to £700 psf.

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Rentysomethings

The relatively affordable prices of 
East London has been a draw to young professionals as well as those working in the media industry. Our analysis of the Census shows boroughs to the east have shown the greatest increase in the number of people working in culture, media and sports between 2001 and 2011. Hackney tops the list but more affordable boroughs further east have also seen large increases.

This trend is reflected in the growing number of ‘rentysomethings’ in the area and represents a good opportunity for investors. The most notable example is East Village, the country’s largest professionally managed Private Rented Sector Scheme. It comprises of 1,439 rental homes with asking rents ranging from £380 for a one bed to £615 per week for a three bed.

Tall buildings are springing up across the east

Development is spreading not only outwards but also upwards. Within E14, which includes Canary Wharf and Poplar, 62% of homes with planning permission (just under 4,000 flats) will be on schemes which include towers over 20 storeys according to Molior. Landmark North, a 75 storey skyscraper with permission for 822 homes on Westferry Road, is among the tallest.

Across the wider East of city area (Tower Hamlets, Hackney, Greenwich, Newham, Lewisham) a total of 43 sites with planning permission for a total of 55,325 homes, include towers over 20 storeys. While tall buildings are springing up across the east, Canary Wharf has the highest concentration of towers, particularly in the most prime locations close to the core Canary Wharf estate. There is fierce competition to be the best in class and to top the quality and specification of Pan Peninsula (completed 2009) with its private cinema, 50th floor cocktail bar and grand foyer.

However, as more developers seek to 
shift their product from mainstream markets 
(sub £1,000psf) to prime, we would question whether some are sufficiently differentiated to justify their premiums.

Taken from
London Development: Building opportunities East of City