London Update
Issue 45
Feature Article: London On The Move
Economic and Market Roundup
Regeneration News
Young Index Q3 2009
About Young Group
Feature Article: London On The Move
Peter Bishop
Group Director for Design, Development and Environment, London Development Agency (LDA)
Like every large dynamic city, London faces the challenge of adapting infrastructure built by earlier generations to cater for current and future needs. We need a system that can accommodate London's growing population; facilitate efficient movement of people and goods; and improve connections across and between London's diverse neighbourhoods.
But that's not all. The LDA's vision for London's development - the New Urban Agenda - (www.lda.gov.uk/newurbanagenda) is based on the premise that urban infrastructure needs to be considered in the context of other fundamental urban issues facing London today: the urgent need to kick-start development and to deliver new housing within successful, sustainable communities; the need to address the challenges posed by climate change and the need to ensure that development relating to the 2012 Olympic and Paralympic Games leaves a long-term legacy of successful regeneration.
Kick-starting development
Whether there is growth or recession, economic performance is never uniform across a city. Strategic and precise public sector intervention can redress market imperfections and unlock economic potential and instigate or accelerate beneficial change.
News that the European Investment Bank has decided to grant Transport for London (TfL) a £1bn loan to forge ahead with Crossrail gives us, to quote the Mayor Boris Johnson, 'a billion more reasons to proceed with the unstoppable force that is Crossrail'. This will open up a swathe of London which hitherto has not had good transport links.
The LDA is also working with TfL to support highly targeted investment to upgrade, extend or link transport systems elsewhere. By taking a masterplan-led approach the LDA will be able to optimise sustainable economic growth around these new transport nodes.
Green Infrastructure
London's green and river spaces - parks, natural landscapes, canals, dock edges, rivers and riverside walks - already offer unrivalled opportunities for walking, cycling, recreation and exercise. They also make a vital contribution to the city's environmental resilience and biodiversity, regulating urban temperatures and helping to alleviate the risk of flood.
East London Green Areas
Our aim is to enhance and connect such spaces to create a green infrastructure across the city, reducing Londoners' car dependence and ensuring that visitors and residents alike experience the wide variety of outdoor spaces that London has to offer.
The LDA is overseeing the delivery of The East London Green Grid, a network of green infrastructure projects across east London including projects as diverse as Rainham Marshes, Dagenham Washlands, and the Lea River Park. A total of 1,320 ha are programmed for implementation by March 2011. These projects have attracted £88 million in capital investment, from various sources including the GLA group, Central Government, the EU, and major land developers.
The East London Green Grid will be expanded across the capital opening up opportunities to overlay green space with pedestrian and cycle routes. A delivery strategy for an All London Green Grid will be published in summer 2010.
Olympic Legacy
The Mayor and the LDA are playing a central role in supporting the delivery of the London 2012 Olympic and Paralympic games and ensuring the area's long-term prosperity and success. We expect to see some 40,000 new homes in the Lower Lea Valley area, making it one of the most significant growth areas in London.
The Olympic Park in Stratford
The LDA is working to secure £16m to fund a number of projects to create a network of high-quality public spaces to structure and support the development of this new city district including: High Street 2012, a project to transform the road that connects Aldgate with Stratford Town Centre; improvements to the Greenway, a pedestrian and cycle path linking the Lea Valley eastwards to the Roding Valley and on to the Thames and a series of projects throughout the Olympic Fringe area.
Join the Debate
The LDA is engaging with urban theorists, practitioners and policy-makers from around the world to ensure that the New Urban Agenda is informed by the very best intelligence and expertise.
As part of this dialogue we are holding a year-long series of debates and email updates covering the fundamental issues which affect the quality of our cities. The next event, London on the Move, takes place on the morning of Monday 2 November at the Institute of Civil Engineers (ICE) at One Great George Street, London SW1. Jaime Lerner, the former Mayor of Curitiba and others will be discussing the relationship between infrastructure and development.
Book your seat via the ICE website or info@lda.gov.uk to subscribe to regular electronic updates about our on-going dialogue about the way we understand - and shape - our city.
London Development Agency
The London Development Agency plays a vital role in helping to shape London's design, development and environment and is guided by the Mayor's London Plan.
Since its inception in 1999, the London Development Agency has been behind several major regeneration projects across London - including Wembley Stadium and Woolwich Arsenal.
It was our job to buy and clean up the land needed for the 2012 Olympic and Paralympic Games and develop plans for a lasting legacy from the Games. We have played a lead role in developing plans for new housing at Dalston Junction - building above the new East London Line station - and at St Andrew's in Bow. We helped draw up the proposals for the Mayor's Housing Design Guide, which include standards for room sizes, ceiling heights, natural lighting and private outdoor space.
We are investing in measures to help combat climate change, with ambitious proposals to retrofit London homes with simple energy-saving measures. Our plans include creating a major decentralised heat network, which captures waste heat from existing sources and converting this into heat that can be used to heat homes and buildings, starting in east London. Our investments will fund new waste infrastructure, which will ensure that much more of London's commercial waste will be a resource - for recycling and for energy - rather than contributing to landfill. Our support for London's boroughs and developers - through innovations like the new brownfield sites database, which contains 40 layers of mapping information - will help transform the way land is developed in London.
Now we have combined our work on infrastructure, climate change, environment, housing and development to take a coordinated design-led approach to maximise the opportunities for sustained growth in London - combining physical regeneration with environmental strategies, transport policies and the phased development of land which people can understand and support.
Framework for a New Urban Agenda
The twenty first century will be shaped by a series of large dynamic cities competing in a global market. World cities need to concentrate on a larger and more long-term agenda.
In order to compete in a global market - and to attract footloose capital and talent - all contemporary cities need to address:
- the way they house their citizens
- the relationship between development and transport
- the quality and attractiveness of their physical spaces and
- the way they meet the challenges posed by climate change.
None of these issues can be tackled in isolation. They call for a New Urban Agenda - a radical rethink of our approach to the urban environment.
We are working across the public and private sectors to devise practical investment strategies aligned to clear regeneration plans which can meet the current challenges as well as preparing London for the future.
Peter Bishop
Group Director for Design, Development and Environment, London Development Agency
Bank of England Base Rate Remains at 0.5%
The Monetary Policy Committee this month elected to hold UK Base Rate at 0.5%. It is unlikely to change until the Bank of England's Quantitative Easing policy has ceased and, as expected, the MPC delayed making any decision regarding changes to its Quantitative Easing programme until after next month's quarterly inflation report.
IMF Warns Lack of Credit Will Hamper UK’s Recovery
Dominique Strauss Khan - Managing Director IMF
The International Monetary Fund warned this month that a potential £180bn shortfall in credit next year will harm the UK's economic recovery. The UK's projected shortfall represents 15% of GDP and is far higher than the US and Eurozone (predicted to be 2.4% and 3.0% respectively). The Fund pointed to the lack of credit, weak banks and need to finance the Government's budget deficit as constraints to economic recovery.
ONS Manufacturing Data Confounds Growth Hopes
The UK's projected path of recovery from recession, which many economists had expected to materialise in Q4 this year, has been called into question following a shock 1.9% drop in manufacturing output in August. Commentators had expected the trend of rising output experienced in June and July to continue, anticipating a rise of 0.4% for August. All eyes will now be on the official GDP figures, which will be released on 23 October.
UK Still Attracting Great Investment
Latest reports from the Government's inward investment agency, UK Trade and Investment mirror those reported by Think London in last month's London Update. Despite the global economic slowdown, the UK attracted investment from 53 different countries last year, resulting in record levels of foreign inward investment; up 11% on the previous year.
Consumer Morale Highest for Almost 18 Months
The Nationwide Consumer Confidence Index, which gauges people's confidence about the economy, job market and their own finances, rose to 71 in last month from 65 in August. The rise takes the index to the higest level since April 2008 and reflects an improvement in outlook regarding consumers' present circumstances and willingness to spend.
Housebuilding Volume Hits New Low
A new report by the Smith Institue and Town & Country Planning Association warns that fewer than 100,000 homes will be built this year; only 40% of the output needed to meet the rising demand estimated to be 252,000 new homes per year between now and 2031. However, the Department of Communities and Local Government maintained that work on 30,000 new homes began in the second quarter of this year, up 65% on the previous quarter.
Construction Sector Sees Sharpest Decline Since 1948
1940s London
The building industry as a whole is expected to see the sharpest fall in output since 1948 this year. The Construction Products Association has forecast a contraction of 15% for 2009 and warned that pre-downturn investment levels will not return until 2021 at the earliest.
Development Land Prices Begin to Rise
Latest research from property company Savills reports that residential development land increased in price by 3.6% in the third quarter of this year. This follows two years of falling prices that have seen values across the UK as a whole fall by 50%. London saw the biggest rise of 8.6%, pointing to increasing confidence from housebuilders.
House Prices Continue to Rise But Sales Volumes Remain Low
Last month's London Update highlighted how the various house price indicies report trends based upon different data. However, latest figures from Halifax and Nationwide both show sustained price increases, of 1.6% and 0.9% respectively. For Nationwide data this represents the fifth consecutive increase and places house prices back at a level last seen 12 months ago. However, turnover in the market remains low at 4%, around half of the pre-downturn level. The volume of property offered for sale is also low and experts warn that the pace of house price rises is unlikely to continue as more stock comes to the market.
Homeowners Pay Down Mortgage Debt
Bank of England figures show that £7bn was injected into housing equity during the second quarter of the year. It was the fifth consecutive quarter to see a net downpayment of mortgage debt which according to analysts at IHS Global Insight has seen Briton's inject a cumulative net total of £28.9bn since Q2 2008.
Mortgage Approvals Increase, But Buy-to-Let Lags
The British Bankers' Association reports that net lending increased by 46% in August; a 17% rise from this time last year and higher than the latest 6 month net average. The number of loan approvals now stands at a similar level to early 2008 before the effects of the downturn were fully seen in the market. However, lending in the buy to let sector reached a new low with only 17,918 loans approved last month.
Mortgage Lending Rises by £1bn
The Bank of England's August lending statistics show that net lending secured on residential property increased by £1.16bn, taking net lending back into the black for the month. June's figure had seen a net repayment of £462m, but August's increase offset this to take net lending to £669m.
Repossessions Down
Latest figures from the Financial Services Authority show that repossessions fell by 9% to 13,610 in the three months to June this year. However, this remains 23% up on the same period in 2008.
Olympic Park Entrance Gets Underway
The huge land bridge that will form the Olympic Park's main gateway has begun to be lifted into place. The 250m-long and 40m-wide bridge will be the main pedestrian access into the Olympic Park during the Games - and also forms the roof to the Aquatics Centre.
Euston's Arch to be Recreated After Nearly 50 Years
CGI of the Euston Arch
The original Euston Arch stood at the front of the Grade II London Euston railway station until 1962 when it was removed to make way for redevelopment of the station. However, proposals are due to go before Camden's planning department next year that will see the Arch recreated to include hospitality space and a nightclub. The iconic Arch is set for a new neighbouring site on Euston Road.
New Infrastructure Planning Commission Launched
A new body has been launched by the Government responsible for overseeing decisions on major infrastructure planning applications in a bid to cut the time taken to process major planning applications to less than a year. The Infrastructure Planning Commission (IPC) will give advice on major projects based upon national policy statements to be drawn up by ministers and will begin considering applications next year. The IPC is designed to streamline the planning process and the Department of Communities and Local Government estimates that the time saved in processing major applications will equate to an average saving of £300,000 per year.
Boris Overules Columbus Tower Decision
CGI of Columbus Tower
Columbus Tower, the proposed 63-story office building at Canary Wharf's West India Quay has been given the go ahead by London Mayor Boris Johnson, after he overruled the local planing decision. The tower will overtake One Canada Square to become London's tallest building. Around a third of the building will be office space and another third will comprise a 192-room hotel. Columbus Tower will also contain 70 apartments and retail space. The developers, Commercial Estates Group, is expected to contribute £4m towards the capital's Crossrail project, construction of which is already underway.
Landlords are Increasingly Positive about Property Prices...
Latest results from Young Group's Young Index show the continuation of a rising trend; increasingly positive sentiment among buy-to-let landlords that property prices will stabilise and rise over the next 12 months. 77% of investors believe that London property prices will be at current levels or higher by this time next year (an increase from 57% in the previous quarter and up from a low of 36% in Q4 2008) and 51% of landlords expect the same to be true of UK property outside the capital (up from 42% in Q2 2009 and just 12% a year ago).
London remains the preferred location for investors; 53% are considering buying additional property in the capital within the next 12 months (a similar level to the previous quarter although still down from the peak of 64% in Q1 2008). This compares to 26% of investors who are considering adding UK property outside of the capital to their rental portfolios.
...But Remain Jaded by the Mortgage Market...
However the data shows that fewer than 1 in 3 residential property landlords are tracking their mortgage options on a regular basis and only 11% are assessing the market as regularly as every three months.
This is the second consecutive quarter to see such a low proportion of investors tracking their options (Q2 2009 results was 12%) and represents a sea change from the situation in Q2 2008 when 65% of respondents were evaluating the market on a quarterly basis.
Only 29% of respondents now evaluate their mortgages at least every 6 months, compared to 82% of investors who were actively tracking new deals in Q2 2008. Worryingly, at the end of Q3 2009, 27% of investors admitted to evaluating their mortgages less frequently than once a year.
The Young Index data for Q3 2009 points to investors sitting tight; the average length of time that respondents expected to retain individual property assets stood at 12 years, up from an average of 10 years in Q3 2008.
...and Are Preparing for a Rise in Base Rate
Graph showing Base Rate trend
The latest Young Index survey shows that residential property investors expect the base rate to rise slightly over the next 12 months to just over 1%, but to remain well below the long term average during 2010.
Young Index Q3 2009 - Full Summary of Results
98% of investors intend to hold their residential property investments for the next 12 months. 44% intend to hold their assets for at least 10 years (up from 41% in Q2 2009) and 27% of private residential property investors intend to retain their property investments for the next 20 years or more (up from 25% last quarter).
On average, residential property investors now intend to hold their investment assets for the next 12 years, two years more than this time last year.
53% of investors are considering purchasing additional residential property assets within London during the next 12 months, compared to 26% who are looking at opportunities in the UK outside of the capital.
The outlook for London property prices is stronger than for the rest of the UK. 77% of investors believe that London prices will be at current levels or higher by this time next year (up from a low of 36% in Q4 2008).
The expectation for the pace of property price recovery is conservative. Landlords forecast an average property price rise of 0.73% for London property – and a fall of 1.62% for UK property outside the capital.
51% expect UK property prices outside of the capital to be at current levels or higher within 12 months; the first time since the start of the credit crunch that the majority of respondents point to a UK wide positive price sentiment.
22% of respondents expect the Bank of England base rate to be at the current all time low of 0.5% in 12 months time and 98% believe that it will remain below 2.0%, well below the long term average of 5.0%. According to latest Young Index results, the average 12 month base rate outlook is 1.2%.
57% of respondents cite a lack of lending in the mortgage market as the principal barrier to investment property acquisitions.
...And We Have A Winner!
Everyone who provided contact details when completing the latest Young Index poll had the chance to win £100 of John Lewis vouchers - our way of saying a small "thank you" for taking part. This quarter's winner was Oscar Estaba. Congratulations!
Young London Seeks Quality Rental Property
Following an extremely busy period, Young London has successfully let more than 110 properties in the past 5 months alone. The occupancy rate for property let through Young London is currently higher than 99% and we’re now running short of quality London property to offer to corporate and professional tenants.
If you have a property that you would like to rent out quickly, for a good rental income and with a minimum of fuss, take a look at the Young London website, or call one of the Young London team on +44 (0)20 7593 3300 to find out more about our services and the current rental market in London.
Young Group specialises in delivering Property Portfolio Management services to private and institutional investors. The Group’s activity spans the entire investment cycle from identifying opportunities and financing their acquisition, through to managing the asset (furnishing through Young Furnishing; tenanting through Young London; financing/refinancing through Young Finance), regularly reviewing the performance of the property holdings and advising on strategic direction, through to realising returns in the most tax efficient manner. Young Group supports NORWOOD and CHILDREN with LEUKAEMIA, charities doing valuable work which is particularly close to our hearts.
Visit us online at www.younggroup.co.uk, www.younglondon.co.uk, www.youngfinance.co.uk or www.youngfurnishing.co.uk to learn more.
t: +44 (0)845 356 1000 e: info@younggroup.co.uk
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