Regeneration - when change is good
Head of Research, Jennet Siebrits, looks at the benefits of regeneration
At times we can all be slightly guilty of Nimbyism (not in my backyard); I live in Beaconsfield and there is a proposed 300 house development. There is no doubt there is a huge need for housing in the area, prices have increased by 10.4% last year, but I do worry how it is going to affect school places, local traffic, parking at the station and other local services. Overall, I can see the benefits outweigh the costs, but many can’t. An argument often used by Nimbys is that it will devalue local housing stock. I really don’t understand this, of course having a huge dump of supply on the market could be detrimental, but that isn’t how developers work – they have an invested interest to keep prices going the right way.
In light of these concerns, LSE London recently released a paper (supported by Barratt) investigating the impact of new residential developments on the value of the surrounding areas.
What this paper found was quite the contrary: regeneration does not negatively impact house prices, and when it does (during the construction phase or directly after it) these effects are short lived and prices soon recover. Moreover, it can actually increase them.
This is not news to us, we have looked at how regeneration impacts on prices in our paper the Halo Effect. Our findings take the Nimby concerns and show the complete inverse to be true: properties in the ‘halo’ areas around regeneration sites actually increase in value, by an average 4.9% per annum over and above wider house price growth.
In our research we examined house price growth within six London regeneration areas: Paddington Basin, Riverside Quarter, Stratford, Southbank, North Greenwich and N1 Islington.
In the area around Paddington Basin, property prices increased by around 12.9% per annum in comparison with 9.5% in its wider Local Authority of Westminster, suggesting regeneration had added 3.5% to annual house price growth.
The area directly surrounding the Stratford regeneration site was shown to have recorded house price growth of 14.1% pa over the period of regeneration (probably bolstered by the special Olympic related influences) while the wider locality achieved just a 5.6% increase; suggesting an 8.5% regeneration uplift.
So while regeneration may cause some discomfort during the construction period, nimbys beware, but fighting against development you may be inadvertently restricting future house price growth.