Could the affordability gap between London and Southall property disappear?
In 2015, JLL produced some very interesting research. In it, JLL made house price growth forecasts for Crossrail locations. Southall was high up the list, with price growth of around 46% predicted between 2015 and 2020 compared to JLL’s forecast of house price growth of 36% across Greater London during the same period.
When examining long-term potential, JLL also called out the Berkeley scheme in Southall – Southall Waterside – for a special mention. It said, “The Berkeley scheme at Southall has the potential to transform and upgrade the area, but there are obstacles to overcome and, even then, it is likely to take some time to evolve.”
We now know that the obstacles associated with Southall Waterside have been overcome. The development has started, and completion of the first homes is expected by the end of 2020.
The question is, how close has the house price growth in Southall been to JLL’s forecast, and where are house prices likely to head in Southall in the next couple of years?
Let’s go back to 2014
Ah, the end of 2014. Christmas was around the corner. The 2015 election was nearing. An EU referendum wasn’t being considered seriously. Property prices in London were booming.
In December 2014, London’s average property price was £402,898 (ONS). If you had invested in a property in London in December 2013, when the average price was £352,028, you were sitting on a tidy profit of about £51,000 – or almost 14.5%.
In 2014, the average sold price of a property in Southall was £257,715. This was an increase of only 10% on the average sold price the previous year.
Compared to the rest of London, Southall property was highly affordable. Prices were not growing at the same as the London average. The affordability gap was widening.
Skip forward a year to 2015
There were some major events in 2015:
- The General Election saw a Conservative victory, on the back of a promise to give the UK electorate a say on continuing EU membership
- Construction on Crossrail began
- Southall Waterside went through several phases of planning and design
The mood of the country was harmonious. The economy was growing. The government was doing what it should (whatever that really is!). By the end of 2015, the average house price in London had increased to £450,053 – an increase of around £47,000, or 11.7%. Investors were very happy.
In Southall, property prices reacted very positively to Crossrail construction. At last, the project was getting off the ground, underground. The average sold price in 2015 was £298,518 – an increase of 15.8%. Investors in Southall property had finally done a little better than London in general.
2016 – the UK votes to leave the EU
There was plenty going on in the property market in 2016. The government had started meddling. It increased stamp duties and announced other measures at tackling the ‘evil landlords’ in the private sector. But, of course, 2016 will be remembered as the year that the UK chose to wave goodbye to the EU. The treasury had predicted that house prices would collapse, falling by as much as 30% in the two years following a vote to leave the EU.
Despite the leave vote, the predictions didn’t quite pan out. In London, the rapid house price growth of the previous two years eased. But the average price still posted again on the year. By December 2016, the average house price in London was £472,374, a rise of 5% on the year.
In Southall, house prices performed even better. They burst through £300,000 with the average sold price in 2016 hitting £324,623 – an increase of almost 9%.
2017 – house price growth stagnates
In 2017, ‘Project Fear’ reached fever pitch as the UK government invoked Article 50 and began the countdown to exiting the EU on or by 29th March 2019.
If you believed all the headlines, the UK economy was about to crash. Hundreds of thousands of jobs would be lost. As many as 100,000 of these would be lost from the City of London, as financial firms rushed for the exit and moved to Frankfurt or Paris. We now know that none of this happened. But that didn’t stop house price growth from easing back further.
In London, the average house price posted a gain of just £4,474, ending the year at £476,848, and only 1% higher than where it had been a year earlier.
In Southall, a different story emerged. Regeneration had started having an effect. Crossrail would be coming in the next couple of years. Investors and homebuyers had started taking Southall seriously. The average sold price rose to £371,572 – an increase of an astounding 12.6%.
2018 – London house price growth turns negative
As Brexit day came closer, nerves became tauter. Parliament couldn’t be more divided. The prime minister’s Brexit deal – the Withdrawal Agreement – was voted down. Homebuyers and investors, worried about what the future would hold, shied away from making a financial commitment. London property prices drooped – or did they? In prime central London, some areas witnessed property price falls of 7%, 8%, 10% and more. But across London, the fall was far more subdued.
At the end of 2018, the average house price in London had fallen back to £472,907 – a fall of just 0.8%.
London’s average house price was helped by house price growth in locations such as Southall. Here, the average sold price in 2018 was £378,639 – an increase of 1.9%.
And so to 2019
As the jitters over Brexit have increased, the average house price in London has decreased further. At the end of February, it stood at £459,800, a fall of more than £13,000 in the first two months of the year. House price growth in London is negative, down 2.7% between December 2018 and February 2019.
But not in Southall. This once-neglected London location is bucking the trend. In March, the average sold price in Southall was £397,354, according to Foxtons – already up by 4.9% from the average sold price in 2018.
Why is Southall property performing so well?
Two words: Crossrail, and regeneration.
Work has started on the Crossrail station. Regeneration projects like Southall Waterside are taking shape. People can see things are beginning to happen. It’s exciting, and homebuyers and property investors are beginning to realise how attractive Southall could become as a place to live, work and play.
Is house price growth sustainable in Southall?
In 2015, JLL forecast that house prices in Southall would rise by around 46% by 2020. So, how has the average sold price in Southall fared? Let’s take a look:
- In 2014, the average sold price was £257,715
- In 2015, the average sold price was £298,715
- In March 2019, the average sold price was £397,354 – 54% higher than in 2014 and 33% higher than in 2015
During the same period, the average house price in London has increased from £402,898 to £459,800 – an increase of 14.1%.
In August 2018, JLL revised its forecast for Southall property prices. It predicted that Southall house prices should rise by 8.5% when Crossrail eventually arrives. We think the rise could be even more. With journey times from Southall to the City and Canary Wharf slashed to 24 minutes and 31 minutes respectively, travel to work will be closer to Zone 2 times instead of the Zone 4 times they currently are. The population in Southall is expected to grow by 13% by 2036.
We would expect the affordability difference between average house prices in Southall and London to close further… perhaps even to reverse in the longer term.
For more information about Southall Waterside property, contact the team at Gladfish today.
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