New York Times

‘Crossrail Effect’ Adds Steam to London Home Prices

Crossrail, an east-west line through London, is attracting international buyers to property developments like the Hempel Collection, where two-bedroom apartments are priced from £2.3 million.

By Laura Latham March 12, 2015

Excerpts:

LONDON — London’s brisk property market shows no sign of slowing down, yet the speed of transactions may increase further as one of the most ambitious transportation projects undertaken in Britain takes shape across the capital.

Crossrail is a new rail line that at a cost of 15 billion pounds, or about $23 billion, will link the city from east to west and connect to several suburban towns. Locations with Crossrail stations are attracting serious interest from home buyers and investors.

The route will run from the town of Reading in the county of Berkshire, 40 miles west of London, and cut directly across the city center, via Paddington, Bond Street, Tottenham Court Road, Farringdon and Liverpool Street stations. The eastern section will branch off in two directions: east to Shenfield, 21 miles away, in the county of Essex, and southeast to Canary Wharf and the London borough of Woolwich. There will also be a spur from the western section to Heathrow Airport.

In addition to providing faster and easier journeys into and across London, Crossrail will improve accessibility to several locations, such as Woolwich and Abbey Wood, that have lacked development and funding.

A 2012 Property Impact report from the property advisory firm GVA predicts that Crossrail will deliver around 57,000 new homes. It states that residential prices in areas with easy access to Crossrail stations will rise by 20 percent in suburban locations and 25 percent in central London.

A review released by the property firm Jones Lang LaSalle in January said that prices in some areas, such as Woolwich and Whitechapel, could gain more than 50 percent as a result of the new link. 

“Crossrail is going to completely change the demographics of London,” said Caroline Comer, sales director for the London developer Comer Homes. “Areas that were written off as hinterlands because they were too far from the center will now have much faster journey times to central London.” “We haven’t set prices yet, but demand is already strong, and from a more affluent buyer than in previous years.”

Oxley Holdings, based in Singapore, is turning the 40-acre Royal Docks site into a mixed-use project with more than 3,000 homes. Ching Chiat Kwong, the company’s chief executive, told The Financial Times that the location of Crossrail, less than a mile away, had been a deciding factor in choosing the site.

The upward trend is repeated in several neglected city center areas, notably Tottenham Court Road, the subject of a £26 million overhaul to improve pedestrian access and public spaces, and double retail and leisure facilities. The improved infrastructure is attracting high-end residential projects, including 82 luxury apartments in the redeveloped Centre Point tower, a standout 1960s building at the junction of Oxford Street and Tottenham Court Road.

A 2014 report by the London property agency Knight Frank states that the Bayswater area is attracting luxury developments catering to a higher-end buyer than has previously been seen. The buyer mix is also becoming more international; 50 percent of investors in this location are not British.

Chinese citizens, in particular, are looking for good prospects along the new rail route. “As Chinese buyers have become more aware of the benefits of Crossrail in terms of transport and investment opportunities, we have seen a marked increase in interest, particularly in Ealing, Farringdon and Aldgate,” said Lexi Guo, head of the China desk at Winkworth, a London-based property agency.

Suburban areas are also benefiting. Property agents in towns on the Crossrail route like Maidenhead, Slough and Brentwood have recorded price rises of 8 percent to 16 percent over the past year.

But Susan Emmett, residential research director for the real estate agency Savills in London, cautioned that transport alone would not encourage buyers. “New routes must happen in conjunction with overall improvement to neighborhoods,” she said. “Value uplift has come where locations already have a sense of place. For example, prices in Hanwell, West Ealing, Ealing Broadway and Acton, have outperformed the local borough average by 23 percent over the past five years.”

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Comment:

Crossrail, now named the Elizabeth line, has been under construction for 13 years. The $22 billion-plus high-capacity railway will open on May 24. Reaching west to east underneath central London, the new line has 10 entirely new stations, 42 miles of tunnels and crosses under the Thames three times. It will make central London more accessible to people who live in more distant neighborhoods. First proposed 18 years ago, it is being called the largest rail construction project in the Northern Hemisphere.

And now look what has already been happening to land prices in areas proximate to the line.  The well documented premium effect of rail transit access occurs everywhere around the globe, including right here in our Northwest cities Portland and Seattle.

Does this not elevate the case for capturing these ‘unearned increments’ bestowed on private property surrounding the rail stations? The concept of land value capture has its roots in the theories of the American political economist Henry George, who observed during the Gilded Age that private landowners were reaping the benefits of urban development and public investment through no effort of their own.

Cities around the globe have deployed innovative land value capture mechanisms. In London, for example, the regional transit agency is helping to pay for the new Crossrail project by measuring and recovering increased adjacent property values resulting from the infrastructure. [Lincoln Institute of Land Policy, October 15, 2018]. The estimated total cost of the urban improvements outside every station on the route is £129 million. The target is to raise and implement £90 million of improvements by opening. The funding will be split between Crossrail, Transport for London, and third parties (principally local authorities through developer contributions). [International Bank for Reconstruction and Development / The World Bank, 2017]

It has become clear that Transport for London will depend on additional government funding to get back on sound financial footing.  Now that landowners along the rail line are reaping the benefits of value uplift, it is time to reactivate Section 106 of the Town and Country Planning Act of 1990 and negotiate new agreements with landowners or developers in return for the granting of planning permissions.

Tom Gihring, Research Director
Common Ground OR-WA