The absence of a widely-predicted surge in house prices in Stratford highlight the fact that, while something like the Olympics has the ability to rise property value, supply and demand is still the most important consideration if buying a home with an eye on investment.
No sooner had London won its bid to host the 2012 Olympic Games than the capital’s property gurus were predicting Stratford would be the new hotspot for London’s property investors and buyers looking for homes with a scope for rapid growth in value. But on the eve of the Games, figures show their predictions were wrong.
When the Games were announced in 2005, the average Stratford home was around 20% less than the capital’s average. Nowadays that stands at 35%. Had you followed the expert’s advice and plumped for Stratford to buy a house, or make a buy-to-let investment, you would, financially at least, be worse off than if you had chosen practically anywhere else.
So what is to blame? Unquestionably people have been drawn to the area, no doubt thanks to the hyperbole but also because of proximity to the games and developments in the area. But the rate at which thet have been attracted is far outstripped by the rate at which new properties have come on stream.
The construction industry has been the real winner in Stratford, increasing the number of dwellings in the area by 80%. In other words, supply has grown faster than demand and, just as if a grocer had more apples than people interested in buying them, the inevitable reaction is to drop prices.
Once the Olympics are over there will no doubt be fantastic new infrastructure in the area that will give it plenty of strength as a neighbourhood – not to mention the shopping on offer at Westfield Stratford City – but demand could well drop off even more, leading to a further widening of the gap between the area and the rest of London.
So why is this relevant to you if you don’t live there, or plan to? The moral of the story is to keep an eye on the basics if you are buying a home with an eye on property value as well as quality of life. Improved transport links and general attractions in an area will have an undoubtedly positive effect, but think twice if you see evidence of new homes being built on a massive scale – evolution not revolution is the name of the game.