One of the expectations of any major transport upgrade is that the value of homes and offices nearby will rise — but the rise in value caused by the Elizabeth line has surprised researchers.
A report back in 2012 predicted that Crossrail, as it was known then, would generate around £5.5 billion in additional value for residential and commercial property values. A review of what’s happened since has nearly doubled that prediction, and by 2021, the uplift in property value could be as much as £10.6 billion, soaring to £20.1 billion by 2026.
Nearly a fourfold increase in the original expectations.
A degree of that uplift is thanks to rising valuations of existing properties blessed with being in close proximity to an Elizabeth line station, but in fact, most of it is new build developments who are expressly citing the new railway as the business case for being built.
The report, commissioned by Crossrail and carried out by GVA isn’t just a pat on the back, didn’t we do well sort of document that just lists lots of property value rises, it’s rather more interesting in it looks at why the uplift has been so much higher than expected, and how that can be replicated elsewhere.
This is particularly important with funding for Crossrail 2 still being decided, and if there are provable models for tapping into property value rises that exceed expectations, then it makes the business case for Crossrail 2 easier to support.
When the original report was commissioned back in 2012, they predicted that the Elizabeth line would cause an uplift in property values of 18%, when in fact they are now predicting a 19% rise. So how did they go from a prediction of £5.5 billion to £10.6 billion?
It’s new build properties – mostly residential, and mostly in the East London area.
Crossrail was predicted to lead to 57,000 additional homes being built along the route, but in fact, they now expect 180,000 homes to be built. Many of these are already in the planning process.
Despite scoring similarly on indexes of transport access, West London is thought to have better transport than East, and that affects property values, even though in fact, the journey times are comparable.
The impact of the Elizabeth line is that the property value uplift in East London has been higher than in the West, as undervalued land becomes more commercially viable for development. This uplift has helped unlock stalled developments on lands where the retail sale price of flats was not enough to justify the development cost, but now the higher prices have unlocked the opportunity.
Rising prices are good for existing home owners, if rather less so for those of us left behind, so this report doesn’t go into the issue of how to build affordable homes. It does touch on the issue briefly, noting that social housing developers working in the shared ownership market will also benefit from rising valuations, which makes it easier for them to fund more housing in the future.
In commercial property, they are seeing areas which were often cheaper to rent rising to match the average rents for the wider area – particularly Farringdon and Liverpool Street. Then again, Canary Wharf under performed expectations, possibly due to transport links being so congested at the moment that companies are holding back moving to the area until after the Elizabeth line opens.
Farringdon is an interesting area, as it’s a bit of an underdog in how people view it, yet once all the rail upgrades are completed, it’ll see 140 trains per hour at peak times, from all corners of the city. The Museum of London’s business case for its forthcoming move to nearer the station is in part based on the railway upgrades happening here.
This is to touch on the aspect of the report which may lead to changes in the future, what was done that made the Crossrail impact so much larger than expected.
Unsurprisingly for such a long railway going through a wide mix of areas, it was a number of issues that seemed to have an impact.
In East London, it was the perception of considerably better transport links, or in some places, the actuality of the better railway. People living in the rather forlorn area of Abbey Wood are going to switch from being pretty much a bit of a runt end of a slow train to London, to being within 11 minutes of Canary Wharf. However, people living in Shenfield, are unlikely to use the Elizabeth line to get to Liverpool Street, as it’s a stopping service and slower than the existing fast services.
So the practical impact of the line is in some places more muted than others, but the perception of the railway is driving value upgrades, helped by the rebuilding of some stations, and in many cases, the regeneration of the local streets.
This is possibly one area where Crossrail didn’t get things right — in hindsight — because it wasn’t given funding for works outside the stations, and it was down to local councils and TfL to scrape together funding. Yet, those external works are having an outsized impact on how people perceive the arrival of the new line, and hence the desirability of living in Romford or Abbey Wood.
Future rail projects would be wise to include the wider streetscape in their funding.
With so many sites in London being cleared for Crossrail, and then later rebuilt, the project has turned a roughly £500 million profit on the oversite developments. One of the issues that may have held back some of the potential gains were fragmented land ownerships, making larger developments harder to get approved.
That said, sometimes it’s better to have less revenue from property developments, but a more distinctive collection of buildings near stations. That the opportunity could exist though, may help with future rail projects such as Crossrail 2.
The impact of commercial developments is expected to be lower for Crossrail 2 though, as the vast bulk of its route is far more residential and in areas where capacity upgrades of the railways are needed.
In that, Crossrail 2 needs to develop funding models that take into account the expectation of a huge wave of new property developments along its route, and it seems from this report that Crossrail 2 may need to increase the impact it was expecting to have on house building — for the better.
The conclusion though of the report is that in the future, transport infrastructure projects should look beyond the ticket barrier and work closer with local councils and authorities to unlock value in housing and office developments.
A coordinated approach would let the business case argue that they can deliver even more housing that would be traditionally predicted by the current way of working, and thus leading to increased funding from housing developers for the railway.
That could be a Crossrail legacy for future Crossrails.
The report, Crossrail Property Impact & Regeneration Study: 2012 – 2026 is published by GVA. You can download the report here.
