Having headed south to escape the congested, noisy and fast-paced roar of the city to secure better value for money housing, the repeated disruption of rail journeys is causing some to question how much damage the rail network is doing to the value of their homes.
This week, our experts examine what impact the Southern Rail dispute is having on house prices and how infrastructure investment and local economic factors can improve or devalue localised housing markets.
Paul Wareham, managing director, Countrywide Surveying Services, says the suffering endured by users of Southern Rail services may weigh heavy on the shoulders of those currently living along those routes but it is unlikely to be considered as long-term reason not to buy.
David Catt, chief operating officer, Hometrack, says house prices are unlikely to fall in areas with poor transport links, but a slowing in price growth may affect lenders’ appetite for extending high loan-to-value deals in those areas.
Miles Shipside, director and housing market analyst, Rightmove, sets the impact of the Southern Rail disruption in the context of more severe localised economic shocks to highlight how the recent rail interruptions should have minimal long-term impact on house prices.
Commuting can be painful at the best of times, but Southern Rail passengers have had a particularly rough ride of late. London’s suburban rail network is creaking at the seams, under pressure from year-on-year double digit passenger growth as workers pile into a booming capital. Added to that is the long-running industrial dispute, staff shortages, aging trains and disruptions from the redevelopment of London Bridge station. Passengers have had their tolerance tested to the limit and sometimes beyond.
As the largest surveying firm, we are experts in dealing with a range of property challenges, whether the factors are environmental, infrastructure or industrial; and while we know that there are issues with the Southern Rail route, this is not in the same capacity as something like HS2 or Crossrail. Travel in and around the capital is much maligned and often unpredictable, whereas Crossrail and HS2 are having a tangible impact on property value, both can be either a concern or benefit for buyers and sellers dependent on property location in relation to proposed routes and stations.
People buying a home tend to have long horizons, they think in years or decades rather than weeks and months. The average homeowner moves only once every 15 years which makes choosing where to live a decision they have to live with for a while. If poor service continues there is certainly a danger that it will start becoming ingrained in the minds of buyers. But for now it’s the longer term lure of a rebuilt London Bridge, new trains and the prospect of Transport for London taking over services and the quality of property that buyers are thinking about.
Nationally, house prices are rising at circa 8% per annum but at a localised level this varies from -15% to +20%. Over the last 20 years, localised surges in house prices have been down to strong consumer expectations for jobs and the economy, together with changes in the availability of credit, lower mortgage rates and rising incomes.
Excess house price growth, over and above those driven by these economic fundamentals, tends to be related to one-off localised factors such as regeneration, where new pricing levels are created through better quality homes and services, or major improvements to transport infrastructure.
Some of the highest growth markets in London in the last six years have been in lower-value areas in south east London where transport investment and affordability have seen prices rocket as much as Knightsbridge.
Under performance of house prices is typically driven by economic factors. The best example of a weak housing market is Aberdeen, where the fall in the oil price in the last year has impacted the local economy and demand for housing, with house prices down 10% year-on-year. There are concerns in the media over the impact of the rail dispute on Southern Rail commuter routes, and before that fears over the impact of the possible sale of the Port Talbot steel works. While this makes for good copy, local housing markets need a sizable external shock to get prices falling rather than merely slowing. However, as lenders look for growth in higher loan-to-value bands it will become increasingly important to understand the direction of travel in localised markets as an important part of the decision making process.
For years, London’s commuters have been looking at the best options of where to live, trying to find the right balance across a range of factors including value, affordability, amenities and accessibility. The trouble is what suits you is likely to suit thousands of others too, so it’s a competitive situation where you hope your short-listed locations are not awash with other prospective buyers who might beat you to your ideal home.
With it being so competitive, acting more quickly than the majority when announcements are made about new transport links or major investment in infrastructure has been a mainstay factor in the capital’s property market for many years. It’s a moving feast, however, and having moved to your best-fit location the dynamics can change as Southern Rail commuters are finding. While commuters are loudly venting their frustration with the disruption, one hopes this is a relatively short-term issue and the fundamentals around desirability of living in the Southern Rail region will endure with minimal effect on property values.
Crossrail is a recent example, and while residents along the route will not benefit until part opening in May next year, and not fully until 2019, it has provided a boost to demand and been a factor behind above-average price rises along the route from Barnet to Slough.
The massive Olympic investment has transformed parts of east London, and further afield Manchester has benefitted from regeneration including the BBC’s new home at Salford Quays. HS2 should prove to be a major boost along its route too giving greater convenience to existing and future residents.
There are also examples through history where withdrawal of investment and associated loss of employment has the opposite effect. Currently, Aberdeen’s previously booming property market is now readjusting to much lower demand with the fall in oil prices and falling North Sea production. Further back the closure of coal mines had a major effect on many towns, and steel industry locations are now grappling with similar issues.