If you build it, they will come — and then they will go. Ross Clark on the peculiar delusion that building a stadium will raise property values in the suburbs
LET”S HOPE THE rest of the 2012 Olympics goes better than the inaugural event: the one in which estate agents spring out of the blocks to hype the property market in and around Stratford, in London’s East End, where the main events will be held. The race certainly got off to a cracking start. Barely had five minutes passed following the awarding of the Games to London in 2005 before the agents were already talking up a predicted property boom.
One of them declared: ‘My wife was so overjoyed that she cried when she heard the news,’ before predicting that prices would soar by 10–20 per cent by the end of the year. Many others followed, trying to establish a case that the Games presented an Olympian opportunity for investors to make a quick buck.
But things didn’t quite work out that way. In fact, now that we are approaching the finish line the great Stratford property boom is looking a bit like Dorando Pietri, the Italian marathon runner who was disqualified at the 1908 Games in London after officials helped his staggering figure across the finish line.
Prices in Newham, the London borough where the Games will be held, have fallen by 1.7 per cent over the past year, and at £221,959 the price of the average home stands only marginally higher than the level of July 2005 (£214,683). Average prices in Greater London, meanwhile, have risen from £274,760 to £354,300. The best places to invest have been the classic residential quarters of the capital: Belgravia, Kensington, Chelsea, a good six miles from the Olympic site.
The demand for prime property there has nothing to do with this summer’s Games; more relevant factors are a low pound, a favourable tax regime for non-domiciles and the perception of London as a politically stable safe haven which is not going to explode, however bad the economic situation becomes.
The great non-Olympic property boom is an object lesson in hype. The narrative that the Games would somehow turn a humdrum corner of East London into a prized residential area carried a great number of people with it, yet the outcome was utterly predictable. After all, if the existence of a great stadium hosting famous sporting events boosted house prices, then Wembley would be one of the most desirable places to live in the capital, instead of a rather dull suburb occasionally blighted by large numbers of football fans. Even in the context of wealthy Kensington and Chelsea, the area around Stamford Bridge, home to Chelsea FC, is a relatively undesirable location. You can bet prices will rise if Chelsea ever leave and the ground is redeveloped with apartments.
Investors in Stratford were fooled by grandiose tales of huge returns on property prices in previous Olympic cities. Given that there is a seven-year period between the selection of an Olympic venue and the actual Games themselves, and that in the cases of several recent Games this period has coincided with a global property boom, it is hardly surprising that somebody has made some money. But delve a little deeper into the statistics and it becomes clear: the Olympics create hype, but they do not boost property prices.
The Sydney Games of 2000 were, just like London 2012, commandeered as an excuse by estate agents to talk up the local housing market. Developers, too, rushed in to erect apartment blocks around the stadium, which was built on the site of an old abbatoir to the west of the city centre. A study by the Urban Studies Research Centre at the University of Western Sydney concluded that between the announcement of the Games in September 1993 and the Games themselves seven years later prices certainly rose in the surrounding area — by an average of 1.11 per cent per quarter. Yet average prices in Sydney as a whole rose by 1.25 per cent per quarter. In South Sydney, an area away from the Games but enjoying regeneration spending of other kinds, prices rose by an average of 1.69 per cent per quarter.
Illustration by Phil Wrigglesworth
THE BUILDING BOOM accompanying the Sydney Games resulted in an oversupply of flats which moderated prices. In London there are 11,000 new homes either built or planned for the Olympic Park in Stratford and its surroundings. Meanwhile, the presence of large stadia, which create an atmosphere of windswept openness punctuated by episodes of overcrowding, did little to promote the locality as a good place to live. The contrast between Stratford and Belgravia could not be greater, the latter having an intimacy lacking in the vainglorious sporting monuments of the former.
The main legacy of the Games from the point of view of property investors will be the transport. Rarely does a train pass through East London nowadays without pausing at Stratford. The International station will serve as a fast connection to Paris and to other destinations in northern Europe — or at least it will in theory.
But no one should be fooled by this summer’s train timetable: when the Olympic carnival has left town, locals may well find themselves suffering the same fate as Ashford, Kent, whose services to Paris have been slashed since the opening of a park-and-ride station at Ebbsfleet in northern Kent.
Estate agents in the East End have given up on the Olympics. Instead they have started to pester journalists with press releases that Stratford is on the cusp of a property boom as a result of the opening of Westfield, the new shopping centre. Shops selling posh frocks are rather more permanent than athletics events, but investors might be inclined to be a little more sceptical this time around. For all the hype, the grandiose sports venues and the shopping centre, Stratford remains an area of rather grubby 19th-century terraced houses built for London’s poor over 100 years ago. No amount of hype is going to change that in a hurry.
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