The general rule is that the better the transport links are in an area, the higher the property prices will be. That’s exactly why we see house prices soar in areas where new transport infrastructure projects are being implemented. However, this rule also works inversely. Poorly managed transport links can take their toll and there are growing fears that the continuous disruptions caused by Southern Rail’s recent industrial strikes are causing house prices and rents to dip in the worst affected areas. For landlords looking to expand their property portfolio into lucrative commuter zones, it can often be a gamble as to which transport links will benefit and which could actually detriment property prices and rental yields.
Recent strikes are taking effect on property prices
Southern Rail blames staff sickness, otherwise known as “unofficial strike action”, for the ongoing interruptions to their regular services. During the most recent strike over 300,000 passengers were caught in a dispute over the changing role of guards on Southern Rail trains. Passengers are becoming increasingly frustrated by their nightmarish journeys to work and employers are often left short-staffed in the mornings because of the train company’s shortcomings. London’s Mayor, Sadiq Khan, is particularly keen to bring the GTR franchise under TFL control.
The fact of the matter is that commuters want reliable transport networks. Considering the extent of the inconveniences caused by Southern Rail in recent months, and the potential for disruptions in the near future, it is not surprising that commuters are becoming increasingly reluctant to rely on Southern Rail’s services.
The worst affected areas
Brighton’s property market looks to be the worst affected by the strikes, but evidence indicates that many other areas in the commuter belt are also being affected, such as Tonbridge and Crawley. Market experts are suggesting that commuters may now look as far as Warwick or Leamington Spa instead of the traditional commuter belt areas. This indicates that commuters no longer prioritise just the distance of the commute, but also the reliability of the train line providing that journey.
Landlords looking to invest in buy-to-let property should consider using these trends to their advantage. Investing in cheaper buy-to-let property in Warwick and Leamington Spa could reap high rewards as these locations become increasingly popular for renting commuters.
Currently, the key piece of advice seems to be steer clear of investing in areas badly affected by industrial action because renters are demanding reliability. That being said, perhaps it is wise to keep tabs on the correlation between strike disruptions and property prices over the coming months so as to assess whether these negative effects on property prices in certain commuter belt zones manage to change course.
So, where is transport improving investor’s prospects?
Crossrail’s plans to drastically improve journey times across London are well underway and if all the construction work goes to plan, it is predicted that the full route connecting London and the home counties of Berkshire, Buckinghamshire and Essex will open in late 2019. But before Europe’s largest infrastructure project can even begin to speed up journey times across the capital, Crossrail is already making a huge impact on the property market.
The sharp increases in housing prices along the rail route are part of what has been coined the “Crossrail effect” and according to Knight Frank’s 2015 residential research on Crossrail, prices within a 15-minute walk zone of planned Crossrail stations outperformed the wider market in all the eastern, central and western Crossrail station areas. If predictions are correct, the rail route is set to boost commercial and residential property value across the capital by a staggering £5.5 billion between 2012 and 2021.
Although prices have already increased significantly since the bill received Royal Assent in 2008, recent forecasts state that property prices along the line should continue to rise by at least 3.3% per year until the line opens. There is still huge potential for prospective investors considering jumping on the bandwagon and buying up property in the areas that are set to benefit most from Crossrail and its subsequent regeneration projects. Some of our top picks are:
The Reading to Paddington train journey is said to be one of the UK’s fastest growing commuter routes; Reading council says around 24,000 Reading residents travel to London on a daily basis. This number is set to rise in coming years bringing in a huge number of commuters from villages and towns in Berkshire and South Oxfordshire. Not only is Reading pushing for “city status” on the back of Crossrail, but extensive regeneration plans for the area surrounding Reading station and its town centre have been on-going since 2013. The Station Hill development plan alone is bringing 930,000 sq ft of office space, 150,000 sq ft of retail space and more than 300 residential units within a few minutes of Reading station. With property prices set to rise by 43% between 2015-2020 (JLL data), and rents expected to continue climbing, now certainly seems like the optimum time to invest in Reading and its suburbs for guaranteed returns on rent for both residential and commercial buy-to-let property.
Slough is one of the areas enjoying the fastest house price growth in the country. From 2019 Crossrail will cut journey times to Liverpool Street by 23 minutes. Like many other places along its route, Crossrail has provided Slough’s previously unattractive town centre with a much needed regeneration project comprising of £45 million of public investment. JLL data predicts that house prices in Slough will rise by 45% by 2020, whereas other research predicts prices to rise by up to 50%. According to Zoopla, the average home in Slough, currently worth £315,731, would rise by an incredible £148,393. Although the lack of affordable housing in Slough is an issue that is currently being addressed in the town’s regeneration plans, the property shortage in Slough could be good news for landlords looking to rent out properties and benefit from significant rent increases in the area.
Hayes & Harlington:
Hayes is another area benefitting from a regeneration project thanks to Crossrail. Like Slough, it boasts a fast connection with London’s Heathrow airport, and it is expected that many big employers will move over to Hayes in coming years. Even though Hayes will become even better connected, property prices are still relatively low. This gives Hayes & Harlington great potential for capital growth and great buy-to-let opportunities for investors who jump in soon.
Is it too early to invest in Crossrail 2?
With proposals for Crossrail 2 still awaiting approval, the question remains as to whether it’s too early to start buying up property along the proposed rail route. By the early 2030s it is hoped that Crossrail 2 will serve stations throughout the South East, providing links between the South West and the North East of London, as well as destinations in Surrey and Hertfordshire. Perhaps, then, Crossrail 2 will resolve some of the issues commuters are currently facing as a result of strike action by Southern Rail. However, that’s all speculation.
Since transport links and regeneration projects have historically played a key part in property price performance it is very likely that Crossrail 2 will mirror, if not exceed, the expectations of the current “Crossrail effect”. Although its plans have experienced criticism from residents in Wimbledon and Chelsea, Crossrail 2 is continuously gathering political support and the project plans to start construction work in 2023.
Using the house price increases from Crossrail as an example, many landlords who are looking to expand their portfolio believe they are taking a low risk investing before any official financial or political commitment has been made to Crossrail 2; those who get in early are likely to benefit from the most capital appreciation. There is already evidence of land being purchased along the route with the intention of sitting on it until the time is right to offer it to house builders and developers at a profit. If prices significantly increase across the whole rail route as they have done with respects to Crossrail, those who have faith in the Crossrail 2 proposals should look to buy property in areas where house prices are typically lower and where commuter times will decrease the most (e.g. Chessington, Tolworth, Epsom and Ewell).
Nevertheless, if reliability is so key to commuters who are looking to rent in these areas, landlords who are less certain about these investment prospects should perhaps hold out to see how the full Crossrail line functions before jumping on the Crossrail 2 bandwagon.
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Article Courtesy of: Arthur