London Update

December 2006

Thames Gateway to bring £12 Billion Per Year to UK Economy
Canary Wharf - Thames Gateway's greatest success to date
Economic Outlook
Editor's Comment
Market Comment
Other News

Thames Gateway to bring £12 Billion Per Year to UK Economy

On the 22nd November, Ruth Kelly, Secretary of State for Communities and Local Government, launched the Thames Gateway Interim Plan. She outlined the special development area, which stretches 60km from Canary Wharf, through Deptford, along the Thames Estuary to Southend in Essex and the Isle of Sheppey in Kent. “This is the most exciting and maybe the largest regeneration area in the UK, if not Europe”, she said. “The fantastic opportunity presented by the 2012 Olympics means that the eyes of the world will be upon us”.

Kelly predicted that it could bring £12 billion per year to the UK economy. The plan includes a Thames Gateway job creation target of 180,000 - half of which are expected to be working in Canary Wharf by 2026.

Government intervention in Docklands has historically been extremely successful, with £4bn of public investment attracting £9bn of private capital up to 1998. The Thames Gateway extends this and capitalises on the 2012 Olympics. With existing commitments to transport infrastructure, environment, homes and jobs, the future for East London’s river quarters is virtually underwritten by Thames Gateway plans. “Ours is a long term commitment”, says Ruth Kelly.

Canary Wharf - Thames Gateway's greatest success to date

The City keeps moving east, with a recent article in The Sunday Times stating that as a financial district Canary Wharf is now larger than Frankfurt – which considering the European Central Bank is based in Frankfurt is quite staggering. (The article went on to suggest that London is now the financial centre of the world.)

There is currently 14.1m sq ft of office space on the Canary Wharf Estate, this is due to increase by 50% when Canary Riverside II (consented) and Wood Wharf are in place. Further to this there is the Columbus Tower which could rise to 63 storeys high. The demand is supported by tenants, recently KPMG, State Street and Bear Sterns have all signed long term agreements to take space in Canary Wharf. They join a list of many established institutions including Barclays, Morgan Stanley and HSBC.

There are also a number of infrastructure plans at various stages including:

	Bridge between Beckton and Thamesmead
	900m cable car between the Millennium Dome and the south of the Isle of Dogs by 2009
	Bridge linking Westferry Circus (near Cabot Square) to Rotherhithe

Editor's Comment

At Young Group we endeavour to make our monthly London Update Newsletter factual, and not a ‘sales’ document. Some months ago we had decided to feature the Thames Gateway announcement in our December issue (which was part of a 2 day event at Excel) together with a brief year end report on the Economy. Due to the timing, the article has coincided with the imminent launch of our Canary Wharf development, The Landmark – a coincidence.

Young Group wish all our readers an enjoyable festive break and a prosperous 2007.

Economic Outlook

Few were surprised when the Bank of England’s Monetary Policy Committee (MPC) maintained interest rates at 5% in December, thanks in part to a fall in the dollar and lower than expected manufacturing data. Interestingly, the housing market has continued to rise unabated in spite of the two recent interest rate increases.

The MPC’s minutes for the December meeting reveal that a further rise early next year is still a possibility, as the consumer price index (CPI) jumped from 2.4% in October to 2.7% in November. The Bank of England is charged with keeping CPI at a long term level of 2%, though much depends on the new year pay deals. If negotiators push for large raises to counter reduced spending power the bank will have to act. However, if the negotiations are largely benign, rates are likely to stay at their current levels for Q1 2007.

Market Comment

	Birmingham Midshires’ (BM) recently published report, ‘Not So Average Joe’ shows 26% of the UK population live in rented accommodation and while 66% of these cannot afford to buy, an increasing number decide to rent for lifestyle reasons. The findings show 13% of renters no longer aspire to own their own home, 12% prefer the flexibility renting offers and 12% would rather rent in their ideal area than buy elsewhere. Tim Hague, MD of Mortgages at BM said, “The buy-to-let market has experienced consistent growth over the last ten years, and these findings help demonstrate why. More and more people now see letting property as an achievable investment and an important part of a balanced investment portfolio.”
	The City’s bonuses are already having an affect on London’s housing market, with activity in the City and Canary Wharf particularly frenetic. Miles Shipside, commercial director for Rightmove, said, “it is traditional for sellers who come onto the market [in the festive season] to trim their prices to attract buyers who are distracted by Christmas. Although that’s what is happening nationally, the London market remains buoyant.”
	The Russians are coming, that is according to Liam Bailey, head of residential research at Knight Frank, who claims Russians have bought 1 of every 5 properties priced at or above £6 million, “Russians have gone from nowhere to becoming the biggest single overseas purchaser group in central London”.

Other News

	Battersea Power Station, Europe’s largest brick building, has been purchased by Treasury Holdings, an Irish owned firm, for £400 million. The site has recently fallen into disrepair after numerous attempts to redevelop the site failed. Their plans include homes, hotels and shops.
	The government have decreed that by April 2008 every estate agency must be a member an ombudsman scheme, the ruling is designed to protect consumers from rogue estate agents, the move has been hailed by many as a big step in the right direction.
	Up to 200,000 extra properties will be needed to accommodate singletons by 2026, a survey from the Centre for Future Studies shows. The study, commissioned by Alliance & Leicester, found more households would be occupied by people living alone within 20 years than by married couples. The research cited the growth in city-centre living.

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