London Ripple Effect

8 January 2015

Why Central London price growth is now making Outer London the best bet for property investment in the UK capital.

THE LONDON RIPPLE EFFECT 

The performance of the London property market in recent years has provided significant returns for many property investors, with stable and consistent capital appreciation and yield delivery contributing to the city’s status as a global investment safe haven. 

However, price rises have by now put housing in the centre of the city out of the reach of an enormous demographic of domestic homebuyers and renters. This began some years ago with buyers priced out of areas such as Kensington and Chelsea, Mayfair and Fitzrovia having to turn their attention to neighbouring districts such as Fulham, Old Street and the Southbank. In recent years this effect has expanded outwards from these initial central areas, driving demand into parts of Outer London previously considered tertiary. 

With housing supply remaining short across all of London’s boroughs, this increased attention on Outer London areas has begun to drive significant price increases in certain parts of the city. 

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This spread of demand and price growth emanating from London’s high-priced central areas has become known as the London Ripple Effect, and investors have been taking advantage it over the past few years to achieve excellent returns across Greater London. 

Areas such as Greenwich, Lewisham and Bromley in the Southeast Quarter, as well as Ilford, West Drayton and Ealing Broadway have already become notable favourites of London property investors in no small part due to this effect, but there remain unexploited Outer London areas that are just as deserving of investor attention. 

A number of factors are key in identifying just which parts of the city will benefit from these rising demand trends. Value for money in buying and renting a home is of course a vital consideration that is driving this movement, but prices are lower across Outer London when compared to those in Central London. 

These demand trends are being defined by real people making personal decisions about where they want to live their lives, and so the key deciding factors that investors should examine when considering an Outer London area are those same factors that you would consider if you were looking to relocate. 

Transport 

Transport connectivity is a key consideration. The demographic of buyers and renters that is newly looking to Outer London is still by and large employed in Central London, so areas that offer the possibility of a fast and convenient commute back into the city are firm favourites. 

Areas requiring around a 30-minute commute into one of the Central London transport hubs such as Victoria, London Bridge, Liverpool Street or King’s Cross typically combine convenience with lower property prices and will consistently rank as strong contenders for Londoners. 

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Economy   

While many of those looking to move out to London’s suburban towns will plan to continue to commute back into the centre of the city for work, many will still value the convenience of working close to home and will be looking to find new employment with a business local to their new area – this is particularly relevant among a demographic of property value seekers that contains many young or soon-to-be families. 

This means that strong local economies are an important consideration for buyers. Towns that are thriving and attracting new businesses and sectors will be highly valued for the opportunities they present, as well as the assurances that such economy stability provides regarding the long-term liveability of the local environment. 

Lifestyle 

A less tangible indicator of Outer London potential is the general lifestyle and level of amenities an area has to offer new residents. The majority of those moving to Outer London will be reluctant to give up the conveniences and ambience of modern living to which Central London life has made them accustomed. 

This means areas that are undergoing, or have recently undergone, significant regeneration work are particularly popular with this demographic. Such projects improve local environments and bring modern retail and leisure facilities to an area, providing a general level of uplift that is very much designed to attract this exact demographic. 

Education 

Another important factor in defining key areas of demand in Outer London is the educational opportunities on offer. Here we return to the fact that this is a demographic containing many young families who either immediately or in the very near future will expect to have a huge stake in local educational performance. 

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In UK education is a tangibly measured factor, and parts of London that offer excellent schools supported by high OFSTED ratings and leading graduation qualification statistics will have a significant advantage when it comes to attracting new residents. 

Where to Invest? 

Based on these factors, Outer London offers a range of areas that fit the bill as promising investment locations for the coming years. We’ve recently talk about Lewisham, Greenwich and Bromley with the Southeast Quarter, one of London’s most active regeneration zones. 

We’ve also talked about the regeneration and renewed connectivity on offer at the new station locations along the forthcoming Crossrail route, and how a number of these areas offer excellent investment value. 

Our market tip for Outer London is further south, in the town of Sutton. Already a popular residential area, Sutton combines the above key factors to present an enticing proposition to Londoners looking for better value away from the centre of the city. 

You can read more about Sutton and what it has to offer both homebuyers and investors in our latest Market Update.

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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