Since the liberalisation of planning laws in 1987, the total value of homes in Hackney has risen by 864% – the fastest of any London borough. This is followed by Tower Hamlets and Southwark, with increases of 684% and 668% respectively, since the same year which also saw the opening of City Airport and the Docklands Light Railway.
Beaten into fourth place, Kensington & Chelsea has seen its residential property increase in value by just 661% since 1987.
These gains compare with the whole of Greater London, with 453% growth in gross property value over the same period.
The value of all residential property in Greater London stands at £1.51 trillion, as of June 2014. This compares to just £273 billion in 1987. Moreover, Stirling Ackroyd forecast the value of London property is set to reach £2.01 trillion by mid-2017.
Andrew Bridges, managing director of Stirling Ackroyd, comments:
“Since the reforms and investment that started almost thirty years ago, London has rebuilt its place at the centre of the financial, cultural and technological worlds.
“At the time, the 1987 Town and Country Planning Order hardly seemed revolutionary – but this apparently dry document has proved profoundly effective. Hackney Council embraced the liberalisation of changes of use with particular gusto, at first through a desperate need for income, and later in a more organised way as the benefits became clear. And that is how Hackney – an unlikely candidate at the time – has led the London property market.
“Now, across London, the City of old has gone the way of the bowler hat – and our capital has developed a buzz from its under-loved corners. Just as a potent economic force is sweeping away old-fashioned views about particular boroughs, this is hand in hand with a more subtle, cultural shift. Londoners are increasingly looking forwards, turning their backs on the decline that dominated much of the twentieth century.”
In absolute terms, residential property in Hackney was worth just £6.0 billion in 1987, rising to £57.8 billion as of June 2014, and set to reach £80 billion by mid-2017 according to Stirling Ackroyd forecasts. Similarly the value of all homes in Tower Hamlets was £6.2 billion in 1987, £48.5 billion in 2014, and is set to reach £71 billion by 2017.
By contrast, residential property in Kensington & Chelsea was already extremely valuable in 1987, worth a total of £13.4 billion, rising to £102.1 billion in June 2014 and potentially reaching £138 billion by 2017. Meanwhile, Westminster remains the most valuable borough in absolute terms, with gross housing wealth of £102.7 billion.
Andrew Bridges continues: “Old hotspots like Kensington or Westminster remain enormously valuable. But now London is looking east. As the capital’s economic and cultural heart grows outwards and eastwards, the City fringes are demonstrating the greatest dynamism.
“Today’s best opportunities exist because of an intricate pattern of new working and living spaces, which only a flexible approach to property uses can allow. Development sites still exist in great numbers around the City of London, and are allowing a growing stock of all types of property.
“What matters most for successful neighbourhoods is a willingness to grasp new opportunities. Investment in infrastructure is needed along the way, as we’ve seen with the DLR and the London Overground. But above all, planning rules that embrace change have been the biggest factor in the creation of new ideas and new wealth.”
Of all London boroughs, Hackney has seen the fastest individual house price rises, since 1987 saw the opening up of the local residential market. The value of an average home in Hackney now stands at £545,000 as of June 2014. This is 583% more than Hackney’s average residential property price of £79,700 in 1987. By the middle of 2017 Stirling Ackroyd research suggests a home in Hackney could cost on average £723,000, or 807% more than thirty years before in 1987.
Second in terms of price growth is Kensington & Chelsea, with the average home now worth 549% more than in 1987. The average home was worth £1,284,000 in mid-2014, compared to £198,000 in 1987.
Andrew Bridges explains: “Price growth has been sharpest for homes on the threshold of London’s future – in boroughs like Hackney or Tower Hamlets that in 1987 were just the backdoor to the City. Creative industries, from the arts to technology, are still shifting London’s centre of gravity dramatically eastwards.”
Across Greater London, property prices have increased by an average of 345% since 1987 – from £98,700 in 1987 to the current price of £440,000, as of June 2014. By June 2017, the average London home is set to cost £584,000, up 491% over the course of thirty years.
Every borough of London has seen residential property prices rise by more than inflation over this timeframe.
Even after inflation, the average home in Hackney is now worth 431% more than in 1987, while Kensington & Chelsea has seen real-terms price rises of 398% over the same period.
Inflation since 1987 amounts to 152%, as measured by the RPI Index, and by 2017 this is expected to reach 175% over the full thirty years since 1987.
Andrew Bridges continues:
“People and skills are the hot iron and coal of our modern economy. And today’s London is where people come together to add value. So over recent decades an understandable premium has developed – to live at the heart of the world’s creative furnace.
“To keep up with price growth, real progress must also address capacity. And this is a growing challenge. At the start of the 1980s London’s population had returned to the level of the Edwardian era – at under seven million. So for the last thirty years traditional approaches to housing new waves of residents were enough; but now we are in uncharted territory once again, fast approaching a new record number of Londoners within the next three years.”
