Large-scale British infrastructure projects are an odd thing. They’re very often late, even more regularly overbudget, and many waver continually on the line between useful public service and expensive white elephant. Yet for all that, for canny investors who’re willing to roll the dice, public infrastructure projects can deliver very healthy returns.
This is particularly true of property. Property in close vicinity to key public infrastructure has long had the potential to skyrocket in value. If you want an example of this, look no further than the London Underground. Research from American real estate firm CBRE, recently revealed that owners of properties within 500m of the Jubilee, Central, Metropolitan, Circle, and Piccadilly lines have experienced annual growth rates of around 10% every year since the financial crash.
But does this translate to Crossrail or the often criticised HS2?
Way back in 2012, Crossrail commissioned a study. This study went on to predict that by 2021, property prices close to the line’s new stations would increase by 25% more than the average price increase in central London and 20% more in the suburbs.
So how are prices around the line’s 40 stations as Europe’s biggest travel and infrastructure project reaches its final stage? (Crossrail was due to open in Autumn 2019 but is now likely to be pushed back to spring 2021)
Well, while Crossrail’s initial predictions have proved to be as starry-eyed as they seemed at the time, the effect has still been dramatic. Dubbed the “The Crossrail Effect” house prices within a mile of any of the stations have shot up 66% since 2009– that’s 15 % more than the rest of London. The most incredible of the Crossrail-generated price spikes is in properties around Bond Street where prices have ballooned by 165.9% to £3.1m on average.
But it’s not just central London that’s seen prices rise. Even end-of-the-line Reading and Abbey Wood have experienced annual spikes of 11.7% and 18.6% respectively.
What’s more, some experts are predicting a further increase in average prices once the project is completed in 2021. Of course, this is likely to be somewhat dependent on the outcome of the Brexit debacle and whether the long-predicted recession hits. However, even in the event of a no-deal Brexit or another financial shock, properties near key infrastructure are likely to hold their value better than others – at least according to the
research by CBRE mentioned earlier.
All-in-all, provided you’ve got at least £500k to play with, an investment property close to Crossrail looks like a shrewd one. It’s difficult to think of anywhere else in the country where property prices are almost guaranteed to rise year-on-year between now and 2021, and you could well end up sitting on the next Bond Street.
Things are a little less cut and dry with HS2, a high-speed line connecting London, Birmingham, Manchester, and Leeds.
Firstly, there’s the timescale. HS2 is now unlikely to be completed before 2033. Predicting the state of the housing market in the next 12 months is difficult enough, let alone 14 years into the future. And that’s, of course, assuming that the project ever reaches completion, something that looks increasingly uncertain as pressure for it to be scrapped grows.
Secondly, no one quite knows how people will react to HS2. On the one hand, it could completely tear up what we currently think of as the commuter belt. HS2 would slash travelling times to London from all 3 connected cities:
Leeds to London: 1 hour 28 minutes (down from 2 hours 20 minutes)
Manchester to London: 1 hour 8 minutes (cut from 2 hours and 8 minutes)
Birmingham to London: 49 minutes (reduced from 1 hour 21 minutes)
So, it’s completely possible we could see an influx of commuters heading north to take advantage of cheaper house prices and a lower cost of living.
This would quite quickly affect house prices as demand grew. On the other hand, the commute from both Leeds and Manchester is still relatively long and likely to be pricey, meaning that for all but the most high-flying commuters the time and cost may not be worth it. This presents the possibility that HS2 could become little more than a very quick ride into London for tourists and day-trippers. But all of this doesn’t mean we can’t make some predictions. Large rail projects do tend to affect property prices, and we have Crossrail and HS1 for guidance.
Taking HS1 first, it’s actually quite likely HS2 will hurt property values, at least to begin with. Those properties nearest to the proposed route of the line will probably experience a slight dip in value due to the disruption caused by building. Nevertheless, it’s important to stress that this is only temporary. While prices dropped during HS1’s building stage, they quickly recovered once work was complete and soon began to increase. The only caveat is for those properties that are so close as to be adversely affected by noise; damage to the price of these properties is probably permanent. Although, most of these properties will have been purchased by the government under compulsory purchase orders anyway.
As for what we can learn from Crossrail, we’ve seen that across London the project has led to substantial rises in value. It’s improbable that prices will rise quite so spectacularly in Leeds, Manchester, or Birmingham – London is usually an anomaly when it comes to housing trends – but given the potential for job creation and accessibility HS1 brings they could well increase.
HS2 might be more of a gamble than it’s cross-city cousin, but when you consider that the costs of purchasing in any of its three hub cities is substantially cheaper than London, it begins to look a lot more attractive. In the very least it’s certainly worth keeping an eye on.