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August 11, 2010
How Will The 2012 Olympics Affect London House Prices?
There is much to be made about the impact the 2012 Olympics will have on the London economy, and especially property prices and urban regeneration. Agents showing properties in East London will always mention the proximity to the Olympic site and the value that that brings. Common belief, such as that in this article from the Economist, is that property prices in the area are benefiting from the Olympic development and will continue to grow. The Olympics, though, is a red herring, especially when it comes to prime London property.
The economy will certainly get a boost in tourism during the length of the games. That boost, plus the other revenue associated with the Olympics will help to cover the start up investment costs of the local development. Without the Olympics, it would be much more difficult to regenerate the Newham and Lower Lea Valley area.
There seems to be an assumption, though, that the Olympics will have some sort of long term growth for the area. I have little doubt that the area will be benefit from the large investments being put into housing, especially affordable housing. What I doubt is that the area will continue to at a higher rate after the Olympics. For that to happen, there needs to be a long term reason for people to continue going to the area. The Olympics doesn’t provide that. Having grown up in Atlanta, I have seen firsthand how quickly a city can forget the Olympic Games. Aside from a new baseball stadium, a neat park and some GSU halls of residence, I can’t think of anything significant that the Olympics has left to Atlanta, only one of which I am a fan.
Moreover, the impact of the Olympics on house prices has not necessarily played out yet, as the Economist has claimed. The 25% growth leads to questionable causation. The borough of Newham has only seen a 4% rise in house prices, with similar improvements in Barking and Redbridge. The boroughs which have been improving are Hackney and Tower Hamlets. It seems to me more likely that these increases have more to do with Shoreditch and Canary Wharf than they do the Olympic Zone, otherwise Newham at least would be seeing similar improvements.
With regards to prime and super-prime London property, there will not be any change. If this recession has taught us anything about the prime-central London market it’s that someone is always looking for a high end home in London. The bulk of the resilience in the London market has been due to an influx of Russian, Arab and Asian buyers looking for high end residential property. Those areas are far removed from Olympic developments and are not in any way affected by it. There is simply too much going on in London, from culture to business to arts and entertainment, for the Olympic Games to be much more than a pleasant distraction and imperative to leave the city for two weeks.
If handled properly, the Olympic Games could be a welcome influx of cash, but I see little reason to believe that it will be more than one off occurrence. Athens, Sydney and Atlanta haven’t seen the change London is expecting, and Beijing is a very different circumstance. Property is a long term investment which is effected by long term factors much more than by single instances. When looking at how a property’s value will change, be careful not to consider how the Olympics, or any big occurrence, will affect the long term.