CROSSRAIL: A KEY DRIVER FOR LONDON PROPERTY PRICES

1 August 2014

In part one of our series looking at London’s ambitious infrastructure project, we discuss the impact Crossrail will have on the city and what that means for London as a property investment market

WHAT IS CROSSRAIL?

Crossrail is Europe’s largest infrastructure project and one of the largest single infrastructure investments ever taken on in the UK.

At an estimated cost of GBP15.9 billion, once complete it will raise the capital’s rail network capacity by 10%, enabling over 200m passengers to make their way in and around London per year.

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With no end in sight to the city’s economic strength and its ability to draw in residents and businesses from across the world, London is expanding every year and leaving the city’s transport infrastructure somewhat stretched. As a result, something had to give, so a range of organisations, agencies, government bodies and London businesses have come together to fund an extensive new rail line that will span the city, linking east to west.

Once finished, 100 kilometres of new track will have been laid across London, taking up to 24 trains an hour through 42 kilometres of new tunnels under the heart of the city. Each train will be 200 metres long and carry 1,500 passengers, which adds up to some 72,000 passengers an hour, or 200 million each year. The Crossrail development will span 40 stations – 10 of which are brand new. As you can see from these statistics the sheer scale of the project is vast.


WHAT EFFECT WILL CROSSRAIL HAVE ON THE LONDON PROPERTY MARKET?

The impact of Crossrail is expected to be massive. We see the project as one of the key drivers of property growth in London over the next decade.

 

THE TALK OF THE MARKET RIGHT NOW IS VERY MUCH ABOUT CROSSRAIL’S CAPACITY TO “UNLOCK DORMANT VALUE” IN PARTS OF LONDON THAT HAVE UNTIL NOW BEEN CONSIDERED TERTIARY.

 

IP Global Associate Director - Investment Management, Selina McFall, recently discussed the demand that regeneration work creates in the London market and we anticipate Crossrail will be no different. The undertaking and introduction of such a large infrastructure project acts as a catalyst for further local improvements, as can be seen in the regeneration efforts both planned and already underway around a number of Crossrail stations. The talk of the market right now is very much about Crossrail’s capacity to “unlock dormant value” in parts of London that have until now been considered tertiary.

Commuting distance will always be a key factor in purchase decision making. Upon the project’s completion in 2018, 40 parts of London will see their connectivity increase significantly. With an average reduction in travel times across London of 15 minutes, Crossrail's services are going to make the areas through which it passes more attractive to residents, both buyers and tenants. This is in turn will drive prices and yields.


ARE WE SEEING ANY UPLIFT IN PROPERTY VALUES AND ACTIVITY YET?

Price growth around Crossrail stations has outpaced the citywide average since the project was announced in 2009. The sale price of homes within a mile of Crossrail stations rose 34% during this time, compared to 26% across the city.

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This impressive performance isn’t entirely representative of every Crossrail station location, although investors should bear in mind that we’re still some four years away from the opening of the Crossrail service. These lower growth areas represent unexploited markets that we are confident will soon start to experience similar growth rates as others places along the Crossrail route. This is excellent news for investors who have the opportunity to maximise their returns if they act quickly to enter these markets before they take off.

In addition to property price gains, what we’ve also seen across the majority of Crossrail locations over the past year are large rises in market activity. Investors who backed our West Drayton project at the beginning of 2013 will already be aware of this, with the area seeing a 43% rise in transactions within 500 metres of the station site over the past year.

Markets within London Transport Zones 2 and 3 that will enjoy journey times of under 20 minutes into Central London upon the project’s completion, have seen particularly notable leaps in property activity. For example, transactions are up 140% in Stratford over the past year, while Ealing Broadway saw an increase of 66% over the same period.

Taking a broader a view, the total number of transactions within 500 metres of a Crossrail station site has doubled since construction began in 2009. In 2013 alone, transactions within a mile of a Crossrail station were up 23%, a significant jump on the London-wide average of 13%.

What we believe demonstrates the project’s role as a stimulus for new investment most significantly to date is that one in ten London homes sold in 2013 were within a mile of a Crossrail station and one-in-five new-build homes sales across London since 2009 have been within a mile of a Crossrail station. The escalating impact of Crossrail should not be underestimated. 


In the second part of our look at Crossrail later this week, we’ll dive into the specific station locations we consider best positioned to deliver investor returns on the back of Crossrail’s introduction.

If you would like further information on Crossrail please contact one of our expert Consultants who will be happy to speak to you about this or any other property investment-related matters.

Alternatively, more information on Crossrail can be found on the project’s official website

IP Global

Written by IP Global

IP Global’s full-service approach is built on extensive market research and analysis combined with a significant financial commitment to every investment we offer. We are able to manage the entire investment process end-to-end, from sourcing, financing, and management to those all important exit strategies, making investment in real estate as straightforward as investing in more traditional asset classes. Our expertise, experience and strong record have produced over USD2.8 billion in international real estate investments in over 30 markets worldwide.

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