Post on 14-Apr-2020
REGENERATION RETAIL AND AMENITY RESIDENTIAL UPLIFT
RESIDENTIAL RESEARCH
FOCUS ON: KING’S CROSS 2016
Residential prices across London have grown strongly in recent years, but many areas which have seen large-scale regeneration and redevelopment have outperformed, and have the potential to continue to do so.
This has been the case in King’s Cross, with high-specification development coupled with an augmentation in the
public realm and amenity helping underpin values, as can be seen in figure 1. Average prices in prime central London rose by 70% between Q1 2009 and the beginning of Q3 2015, whereas average prices in King’s Cross and within a mile radius have climbed by more than 80%.
The regeneration of King’s Cross is unique in its scale, with 20 new streets
The regeneration and development in and around King’s Cross over the last decade is striking. The process has not yet been fully completed, but this placemaking is already having a notable impact on the local residential property market.
2 Please refer to the important notice at the end of this report
Source: Knight Frank Research / CACI
FIGURE 2 Uplift in retail quality 2010 vs 2015
FIGURE 1 House price growth compared Indexed 100= Jan 2009
90
100
110
120
130
140
150
160
170
180
190
200
2009 2010 2011 2012 2013 2014 2015
KING'S CROSS (1MILE RADIUS) PRIME CENTRAL LONDONGREATER LONDON
Source: Knight Frank Research
FIGURE 3 Change in retail quality and house prices within 1 mile of King’s Cross
TOTAL RETAIL SCORE
HOUSE PRICES (INDEXED 100 = JAN 2010)
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,0002010
Ret
ail S
core
(CA
CI)
Hou
se P
rice
Ind
ex
2011 2012 2013 2014 20158092
104116128140152164176188200
Source: Knight Frank Research / CACI
“ The uplift in retail offering around King’s Cross, which has seen a 340% increase in the number of retail units over the last five years, is mirrored in residential activity and pricing.”
GRÁINNE GILMORE Head of UK Residential Research
Change in Retail Quality2010 to 2015
Large uplift in quality
No change
St Pancras
Mornington Crescent Pentonville
King’s Cross/St Pancras
London Euston
FIGURE 4 Uplift in average transacted residential prices 2010 vs 2015
3
FOCUS ON: KING’S CROSS 2016 RESEARCH
and 10 new public parks and squares, creating not only a new residential hub, but a thriving commercial centre for London, attracting firms such as Google, Universal Music and Louis Vuitton to open UK headquarters in the area.
In this report we focus on the changing retail offering in and around King’s Cross, and its impact on the residential market.
Access to shops and other amenities and transport links are key concerns for Londoners when choosing where to live. Firm evidence of this was provided by
Source: Knight Frank Research
Source: Knight Frank Research / CACI
FIGURE 5 Change in retail mix 2010 to 2015
AREA EXAMINED
BARCOFFEE
RESTAURANTGROCERY
340%
37%
21%
4%
24%
8%
5%
37%
21%
4%
24%
8%5%
8%8%
22%
11%28%
22%
INCREASE IN NUMBER
340%INCREASE IN NUMBER
OTHERRETAIL
2015
2010
8%
8%
22%
11%
28%
22%
20152010
37%
21%
4%
24%
8%5%
340%INCREASE IN NUMBER
BARCOFFEE
RESTAURANTGROCERY
OTHERRETAIL
BARCOFFEE
RESTAURANTGROCERY
OTHERRETAIL
8%
8%
22%
11%
28%
22%
20152010
the Knight Frank Tenant Survey, which
canvassed the views of more than 5,000
people living in the private rented sector
across Great Britain, with around 20% of
these living in the Capital.
Londoners said that the main priorities
for them when choosing where to live
were proximity to transport links, being
near to where they work or study and
access to amenities and shops, as shown
in figure 7 overleaf. Those with higher
annual incomes placed more emphasis
on amenities available and having good
local shops when choosing an area in which to live.
The increase in the scale and quality of retail around King’s Cross over the last five years is shown in figure 2. The retail data takes into account the type of outlet, including restaurants and shops, and rates it according to its popularity with shoppers. The red in the map indicates the strongest growth in retail rating over the last five years.
The sheer growth in retail outlets is also demonstrated in figure 5, showing the scale of the uplift in the number of restaurants, bars and shops since 2010. The number of retail units within the zone marked in the map has risen by 340% in the past five years. The growth in the number of retail and other amenities has been accompanied by an upgrade in the quality of retail offering – which together have improved the retail score in the wider areas. As figure 3 shows, the retail rating for 1 mile around King’s Cross, as measured by CACI, has risen from just over 1,700 in 2010 to around 2,400 in 2015.
The number of retail units is set to rise even further in the coming years, with, for example, the opening of Coal Drops Yard in 2018, which will host an array of independent shops in 94,000 square feet of retail space.
The uplift in residential property prices over the same period illustrates the correlation. Figure 4 also shows the uplift in the average prices of all transacted residential units in 2015 compared to 2010. This data includes all new stock and second-hand
>120%
25%Not sufficient data
UPLIFT
Important Notice © Knight Frank LLP 2016 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.
For the latest news, views and analysison the world of prime property, visit
KnightFrankblog.com/global-briefing
GLOBAL BRIEFING
RESIDENTIAL RESEARCH
Gráinne GilmoreHead of UK Residential Research+44 20 7861 5102grainne.gilmore@knightfrank.com
RESIDENTIAL DEVELOPMENT
Rupert Dawes Partner, New Homes Residential Development +44 20 7861 5445 rupert.dawes@knightfrank.com
Priya Pannu Partner, New Homes +44 20 7861 5489 priya.pannu@knightfrank.com
Sam Ball Sales Manager, King’s Cross Office +44 20 3764 8914 sam.ball@knightfrank.com
UK Housing Market Forecast - Nov 2015
Global Tax Report - 2015
Prime Cities Forecast Report - 2016
The London Review - Winter 2015/16
PRIME CITIESFORECAST REPORT ASSESSING THE PERFORMANCE OF PRIME RESIDENTIAL CITY MARKETS IN 2016
MARKET OUTLOOK 2016 FORECAST RISK MONITOR
RESIDENTIAL RESEARCH
IMPACT OF STAMP DUTY REFORM ON THE PRIME LONDON MARKET
LONDON’S HIGHEST-GROWTH MARKETS OVER THE LAST 20 YEARS
PRIME SALES AND RENTAL VALUE MAP OF LONDON MARKETS
LONDON RESIDENTIAL REVIEWFRESH STAMP DUTY UNCERTAINTY JUST AS MARKET FINDS ITS FEET WINTER 2015/16
RESIDENTIAL RESEARCHRESIDENTIAL RESEARCH
UK RESIDENTIAL MARKET FORECAST
“ Regional differences in pricing and price growth are unlikely to unwind significantly in 2016, although the improving economic and employment picture, especially in the regions, will underpin pricing.”
UK RESIDENTIAL MARKET FORECASTLast year we correctly anticipated a slowdown in UK house price growth in 2015. While the market may end the year slightly ahead of our predictions, a continued moderation in price growth underpins our latest forecast.
Headlines November 2015Cumulative growth in UK prices will total 20.3% in the five years to the end of 2020
In the prime London and prime country markets higher transaction costs will continue to weigh on activity and price growth in 2016 as the market absorbs stamp duty
Prime central London prices are forecast to rise by 2% in 2016 and by 20.5% cumulatively by 2020
The risk that UK interest rates rise more rapidly than expected or that the global economy suffers a notable slowdown in activity remain the biggest risks to the UK housing market
As always national average performance disguises large regional variations that still characterise the UK market.
Values are growing more strongly in the South of England (particularly London and the South East) compared to slower growth in the North of England, Scotland and Wales.
These regional differences are unlikely to unwind significantly in 2016, although the improving economic and employment picture, especially in the regions, will underpin pricing. This is reflected in our House Price Sentiment Index which we produce with Markit Economics. Households in every region of the country expect the value of their home to increase over the next 12 months.
Interest rates continue to play a key role in the market. While capital values will continue to be supported by ultra-low interest rates, the discussion has now turned to when, not if, the Bank of England will start to raise rates; markets are pricing in a rise in the second half of 2016. However, as we highlight in our Risk Monitor on page 2, the Bank is most likely to act cautiously when increasing the base rate.
The current ultra-low base rate, alongside an increased appetite for lending among banks, has led to record-low mortgage rates, and mortgage lending has risen during 2015. The flip-side of this trend however, is that the best mortgage rates are generally only available to those who have access to sizeable deposits or equity.
While there are now more mortgage deals available to those with only a 5% deposit – a trend which will continue into 2016, the MMR mortgage rules mean that clinching a mortgage deal will continue to be challenging for some, especially for first- time buyers.
Activity in the market has stabilised at around 100,000 transactions a month, although it is interesting to note that the cut in stamp duty for homes worth less than £1.1 million in December last year and the
definitive General Election result failed to produce an increase in activity.
This was closely linked to a lack of stock on the market, particularly second-hand stock. A lack of available homes to buy will likely continue to put a floor under pricing in 2016. There is now even more emphasis on the delivery of new homes, and while levels of housebuilding have picked up in recent years, the supply of new-build dwellings is still far below Government targets.
Prime marketsThe prime London property market faced a number of headwinds in 2015, led by the increase in stamp duty. Higher transaction costs will continue to weigh on activity and price growth in 2016 as the market absorbs the new rates.
There is a degree of nervousness surrounding global economic events and some reticence following exceptional price growth in some markets in recent years. These factors, combined with the Mayoral election in May, will continue to weigh on demand.
However, the strength of the UK’s economic recovery, continued supply constraints and the diminishing likelihood of a near-term rate rise means price growth will remain positive next year.
The turning point for the prime country property market occurred in early 2013, as prices started to edge upwards. By June 2014 annual growth had reached 5.2%.
However, since then the rate of growth has slowed, partly due to uncertainty surrounding the election but also because the top end of the market is adjusting to stamp duty reform.
Prices remain 14% below their 2007 peak. The price differential between most prime markets and the capital is likely to underpin price growth in 2016.
As the economy continues to recover and house prices outside of London show further growth, the trend for more London buyers to move will gain traction, boosting the ripple effect from the capital.
Please refer to the important notice at the end of this report
GLOBAL TAX REPORT 2015 ANALYSIS OF TAX AND COSTS FOR BUYING, HOLDING AND SELLING PRIME RESIDENTIAL PROPERTY GLOBALLY
Knight Frank Research Reports are available at KnightFrank.com/Research
Source: Knight Frank Research
RECENT MARKET-LEADING RESEARCH PUBLICATIONS
FIGURE 6 Average house prices 2015
1% Don’t know | 5% None of these
71%
Good transportlinks
Close towork/study
Good amenities(gym etc)
Good localshops Affordable
59%
45% 45%
34%
Source: Knight Frank Research
Front cover image: Granary Square supplied by John Sturrock.
FIGURE 7 Londoners’ top 5 priorities when choosing where to live Knight Frank Tenant Survey 2015/2016
stock, and is influenced by the type of units sold in each year. As a result, it is an indication not only of the average change in prices, but also of the nature of homes being sold in the area, incorporating the new residential developments being completed. There are also strong indications of a “ripple effect” of the price uplift from the heart of King’s Cross regeneration area, with price uplifts being seen in every direction. The grey boxes indicate where there is insufficient data to produce a comparison, so no conclusions should be drawn from their omission.
We recognise that other factors, not least the release of high-specification homes into the market as part of the new developments being created, as well as other factors – such as a new primary school – will have an impact on pricing. But there seems little doubt that the increase in range and type
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of amenity attracts buyers to this area of London and maintaining a thriving hub for businesses and residents.