The prime residential market in Wapping generally consists of two property types: converted warehouses which feature exposed brickwork and beams and modern developments.

Canary Wharf

Canary Wharf has transformed from derelict docklands into a commercial centre which rivals the City. It is well connected to the rest of London by the Jubilee Line and the DLR and transport links will be improved further by the new Crossrail station due to open in 2018.

Canary Wharf’s residential market is predominantly made up of modern towers. When development was at its peak in 2010, 56% of sales were new build properties, according to Land Registry. Since then, development activity has slowed and currently only 5% of sales are of new properties.

Property prices

Wapping is the more expensive of the two areas, with an average sale price over the past year of £617,000 whereas Canary Wharf is 23% cheaper at £475,000, according to Land Registry.

Since the financial crisis, house price growth in prime Wapping has outperformed the prime London average due to the limited supply of properties available. Prices currently sit 49.2% higher than their 2007/08 peak, whereas the all prime London average is 35.8%. Despite this, Wapping still offers good value for money with an average price per square foot of £1,022, compared to over £2,000 in prime central London.

Conversely, in Canary Wharf, the high levels of new build properties developed in the lead up to and since the credit crunch meant that price growth was slower. Prime property values have increased by just 20.2% since the 2007/08 peak of the market. However, once the new build properties had been absorbed into the market, Canary Wharf saw stronger house price growth with values increasing by 19.4% over the past two years.

^{Source: Land Registry, Savills Research}

Rental values

In contrast to their respective sales values, the rental values in the two East of City markets barely differ. The median rental values are £1,638 for Wapping and £1,535 for Canary Wharf, according to Rightmove, a variation of just 6%. The relatively lower capital values and therefore higher returns, makes Canary Wharf an attractive opportunity for buy to let investors.

Both areas have seen high demand from tenants resulting in strong rental growth. Average rents in Canary Wharf and Wapping have increased by 17.2% and 6.9% respectively since the peak of the market in 2007/08 compared to just 1.7% across all prime London.

Demand

The demand for prime property in the East of City comes from a number of sources. International residents are an important source of demand for the prime housing markets across London. This is especially true in the prime East of City, where overseas buyers have accounted for 60% of buyers in Canary Wharf and 40% in Wapping over the past 18 months.

The nearby employment opportunities also plays an essential part for the housing markets of Canary Wharf and Wapping, given the proximity to the City and Canary Wharf, two of the main business districts of London. The purchaser occupation profiles in prime Canary Wharf and Wapping are very similar and, unsurprisingly, the largest employment industry for people buying in both areas is the financial and insurance services sector, accounting for 68% of buyers over the past 18 months, an increase from 61% in 2013 and 56% in 2012.

Investment

Investment buyers are particularly attracted to the area for a number of reasons. The private rented sector is the most dominant tenure in the East of City’s property market, with 45% and 37% of all households in Canary Wharf and Wapping respectively being occupied by private renters, according to the 2011 Census. This is higher than the average of 33% for the borough of Tower Hamlets and 25% for all of London.

The prime rental market of Canary Wharf and Wapping is dominated by international tenants, with those from overseas accounting for 54% of tenants during the past 18 months to June.

The majority of tenants renting here (53%) have been relocated for employment reasons and given the fact that Canary Wharf and the City itself are financial hubs, it is of no surprise that 62% of tenants are employed in the financial and insurance services sector.

Average yields in the East of City markets are significantly higher than other parts of prime London which makes the area appealing to investors. In Wapping, prime gross yields currently average 3.4% and those in Canary Wharf are averaging 4.4%, rising to 4.7% for a 1 bed property.

Source: Savills Research