News | Property Information Company

Sep

How Will Crossrail and HS2 Really Affect Property Prices?

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?

Crossrail
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.

HS2

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.

Aug

What Will A No-Deal Brexit Mean for Conveyancers?

Way back in 2017, we wrote a piece tackling what Brexit was likely to mean for the housing market. At the time, the idea of the UK crashing out of the EU without any kind of agreement in place was hardly considered outside the fantasies of a few hard Brexiters in the European Research Group.

How times change.

Prime Minister Boris Johnson began last week by insisting that the UK will leave the EU on October 31 st “whatever the circumstances”. Later the same day, European diplomats were quoted on the record that “A no-deal now appears to be the UK government’s central scenario”. And, Johnson’s most senior advisor, Dominic Cummings also started his week by instructing special advisers across government to step up preparations for a no-deal Brexit. All of which points towards the UK dropping unceremoniously out of the EU in just under 3 months’ time – barring a general election, an increasingly unlikely second referendum, or act of divine intervention.

But what does this mean for the housing market and, by extension, conveyancers?

The Housing Market Depending on where you look, the short-term forecast for the housing market ranges from grim to slightly less grim – something that’s true for both prices and transaction numbers. The Bank of England has described the potential impact of no-deal on the housing market as significant. It went further, saying house prices could plummet by as much as 30% in the event of no deal. Even more conservative estimates from mortgage lender Halifax suggest prices would quickly fall by 5%. This is against a backdrop of already fairly flat growth of around 0.4% for most of the year so far, with Halifax also reporting a slight decline in property prices from June. Alongside this, according to HM Revenue and Customs’ (HMRC) June data, transaction numbers are also falling.

The 84,490 residential transactions recorded in June represented a 9.6% monthly decline when compared with May’s figures and a 16.5% reduction in transactions when compared with June 2018.

According to analysts, this slowdown is mostly being driven by cash buyers who aren’t subject to chains and have no real pressure to move, and with Brexit creating uncertainty, it’s likely that many are simply opting to wait and see. And That Could Mean Bad News for Conveyancers For conveyancers it’s a simple equation; uncertainty generally means low confidence in the market which in turn means fewer transactions and, ultimately less work. This is likely to persist in the very least until past the October deadline. On a macro level, the legal sector as a whole could stand to be one of the hardest hit in the event of no deal. The UK is currently the second largest provider of legal services globally and the largest in Europe by some way, equivalent to 1.4% of UK GDP and creating an export surplus of £4.4bn as of 2017. However, despite its prestige and vital role in the UK economy, some experts are predicting a no-deal Brexit could cost the legal sector £3.5bn in lost volumes – a 10% decrease on an ‘orderly’ Brexit.

This is partly down to the potential loss of access to EU Lawyers’ Directives, which provide EU-wide rights on services and establishment, but also down to the wider economic impact of a deal-free exit such as stagnation of the housing market. But It Probably Won’t Last If you’ve made it this far without considering a career change or beating your head repeatedly on your desk, well done, it’s time for some good news. The last decade of political, economic, and social turmoil has revealed two things about the UK housing market. Firstly, that it hates nothing more than uncertainty. This is obvious, after all, most people don’t make big investments in times of unpredictability. Secondly, the UK housing market has proved remarkably resilient. This was demonstrated by its relatively swift return to form following the 2008 financial crisis.

Property remains one of the most stable assets and has always had a propensity for weathering political and economic storms and recovering quickly. If you take a longer-view, you can see that the national average for house prices has actually risen and the market has had stable year-on-year growth for the last decade – despite the Brexit vote. Even the fall in transaction numbers is viewed by most as a temporary blip and explainable as being down to the uncertainty caused by March’s deadline. Most commentators believe that once the Brexit debacle ends – even if that’s with a no-deal – transaction numbers should quickly begin to return as the housing market reasserts itself. On top of this, a decrease in house prices could act as a catalyst at the bottom end of the market, with first- time buyers receiving a timely incentive to get onto the ladder. Alongside this, a decline in the value of sterling could well make investing in high-value commercial and off-plan property more attractive to overseas investors – mitigating a lot of the damage a drop-off in everyday residential transactions. Of course, none of this is to downplay the potential impact of no-deal. The truth is that we just don’t know what will happen and commentators far better qualified than us are struggling to make concrete predictions. However, while the first part of this blog makes for pretty gloomy reading, it’s worth considering the form.

The housing market has rallied quickly after far more serious economic shocks than Brexit (2008 being the obvious example) and long-term trends are positive. It’s a little early to be making bold predictions, but just maybe our worst fears might turn out to be little more than that.