Affordable living close to the city coming soon
Potential investors with an eye on the London property market may benefit from present market conditions which have led to a supply-and-demand imbalance, according to industry insiders.
The recent financial turmoil has altered the landscape of the London property market, which has seen a significant drop in developer activity.
Constrained access to finances has resulted in a fall in the number of new private residential developments reaching completion and on the start of new developments. The number of projects expected to be completed this year is about 60,000, half the number of last year's completions. Private residential starts in the last quarter of last year dropped to less than a third of the quarterly average of the previous year, according to property consultancy and research specialist Molior.
Indications are that there could be a shortfall in the number of quality homes available for rent, especially with a growing population in London which is expected to increase by 5 per cent annually over the next six years.
James Talbot, a partner at property agency King Sturge, said market conditions were attractive for potential investors, particularly for off-plan developments. 'With a lack of liquidity in the mortgage market restricting transactions of completed properties, developers struggling to raise capital thus placing new constructions on hold, and many market commentators predicting that we are close to the bottom of the cycle, savvy buyers would do well to buy property that will not be completed for three years on attractive payment terms.'
He said that with newbuild starts at an all-time low and demand set to rise once mortgage lending picked up, demand would far outstrip supply. 'Also factor in that many interest rates are low, so with deposit accounts not earning money and stock markets falling, now could be a time to re-enter the market.'
City Peninsula is a new development in Southeast London and part of a regeneration project being constructed near the River Thames. The project is London's largest regeneration scheme with an entirely new residential and business community called Greenwich Peninsula under construction.
Greenwich Peninsula should provide homes for 25,000 people, jobs for 24,000 and amenities including shops, restaurants, parks, health care facilities, entertainment, schools and colleges and 31/2 million sqft of commercial space.
City Peninsula is on the eastern side of the development close to Canary Wharf and The O2, formerly the Millennium Dome, which now hosts major events including music concerts.
The development will provide 166 apartments and duplex townhouses with views overlooking the River Thames, Canary Wharf and The O2. The one-, two- and three-bedroom apartments will feature balconies, terraces or gardens and contemporary interiors with wooden floors, tiled wet rooms and contemporary kitchens. Penthouses will offer upgraded specifications.
Mr Talbot said the development was being built with environmental issues at the forefront and was expected to achieve one of the highest 'eco' ratings set by the government.
Mr Talbot said the development's location next to the river, its proximity to transport links and it being in the early phase of the overall regeneration scheme made investment in the property an attractive proposition for investors.
'Greenwich Peninsula is just one stop from Canary Wharf and four stops to the city. With such excellent transport links and being on the river, many have likened the area to being the next Butler's Wharf,' he said.
'Factor into this the bustling nightlife you will find at the bars, restaurants and clubs that are already operating at The 02 and the many developments likely to follow City Peninsula, I feel it is better to be at the start of the regeneration as an investor rather than when the area is fully established and returns are lower.'
Low interest rates also made the development attractive. The Bank of England's recent action to cut interest rates to 0.5 per cent marked the lowest level of interest rates for more than 300 years. Mr Talbot said although it was impossible to predict accurately what the next rate move would be or when it would happen, there was a possibility that interest rates could fall to zero.
'The past six months have proved exceptional and no one would have expected to see interest rates at 0.5 per cent if they had been asked in September,' he said. 'We feel that the interest rate should stay low for the next two years. Also remember that compared against the previous housing crash [in Britain] when interest rates were 15 per cent, should levels return to 5 per cent in the next three years then this can still be considered low.'
The mixed-use development should attract a broad spectrum of occupiers including young professionals who liked the riverside location and proximity to Canary Wharf and the city, but without the premium price tags of those locations, Mr Talbot said.
City Peninsula should be completed in 2011. Sale prices start at GBP249,995 (HK$2.68 million).
