2012: Stratford, A Property Bubble Waiting To Happen?

[King_Nick]

Hi All,

First post on these forums and I thought I'd dive straight in. I was actually searching for info on buy to let investments +2010 +Stratford and came up with a indexed post from 2006 in this very forum and I thought why not come in and have a chat.

A friend of mine has bought property in East London, very close to the Olympic Village area, her investment strategy is a little simplistic for my liking and she only has one option which is capital growth because she bought at near to market value and the rental yield is low or zero after costs.The property is a two bed which is already refurbished, so no option to add value and sell. Recenlty over dinner as politley as possible I tried to let her know there was various potential pitfalls to her strategy, in fact the real truth is I see it as more of a gamble than an investment in her case. For my money I'd always want some yeild in an investment, even if its long term captical growth where the real value lies. Especially in this area, and here is why.

My worry is that many pro/amatuer investor have speculated on this area, all the ingredient for long term capital growth are there I grant you. Massive investment in infrastructure, biggest park in Europe, sporting facilities etc, with all the long term benefits which come with it, buying property and waiting for capital growth in the long term can't go wrong. Its a logical argument.

Here is what I suspect is likely to happen and I'm interested to hear others opinions:

The Olympic Village will provide 17,000 beds for athletes and officials during the Olympic Games and 7,500 in the Paralympic Games. After 2012, it will leave the legacy of up to 3,500 new homes, many of which will be affordable, with the new communities supported by new parks, open space, community facilities and transport links. Source: london2012.com.

I have personally seen large blocks recently built on Wick Lane where there is due to be a footbridge into the village, so there are now two large blocks on that street with several around the back of Hackney Wick, a couple of these are laying empty at the moment and not being offered for sale. Across the A12 on Tredgar Road, is another large estate of flats. And three other blocks being build as I type. Go south Down the A12 to the round a bout towards Startford and you'll find another recently completed block. From the round a bout up the high street to Stratford, there are loads of blocks completed and being build. Further down again by Bromley By Bow there are also blocks complete and in the process of being built. I have not been further East to the other side, so I am not sure if there is further residential developments that side but without finding the stats, its clear there are thousands of new homes/flats that have been built in the area over the past few years and in production now.

If you search the renting ads you'll find there have been rooms for rent in these blocks almost constantly for months, giving a strong signal that many are owned by buy to let landlords (BTLL). Plus I am sure that many BTLL have bought up conversions and older housing in the area too. So with the release of all the Olympic residential developments, the new builds and existing property in the area which has been snapped up as investments there is literally going to be thousands of properties avaliable for rent in the area.

I find it hard to imagine how this will not mean that after 2012 there is going to be a big over supply of rental accommodation onto the market, meaning downward pressure on rental yields and potential for BTLL to have property that is either making a loss over their costs or worse still void for months on end. Amateur investors who do not have sufficient yeilds to cover reduced rents, have not put money away to cover potential losses or can't cover them from other incomes maybe forced to sell, meaning they'll be increased supply of property for sale too. I would be surprised to think that demand will match supply in the short to medium term.

Be interested to hear your thoughts on this?

Cheers,

Nick

[bearwithasorehead]

Add to that a long period of economic stagnation and your analysis sounds about right

[Dart6911]

It depends on you timescale.

I live in Leyton on the other side of the Olympic site. The area does need more accommodation, There is a lot of rental property in the area reflecting a huge demand to Live in London close to transport to take you into central London, I for example use the Central Line to the City. Very convenient , we also have the Jubilee line and cross rail on the way.

I suspect we will see the 'shape of london' shift further east as straford, and other areas of east london, are the few places where you can still build blocks of appartments, thats the nature of property there are not making any more land and people are still moving to London from around the world.

Also the planners are making some unhelpful decisions for example a no. of the new blocks of flats on stratford high street don't have parking and insist on owner occupation. This will massively increase the values of flats that you can rent out with parking.

Your friend will need the patience to wait for a revival in values but the cycle will repeat itself over the next 15years, I suspect in less than 10 years the daily mail will be saying things like, homeowners don't need to work anymore as values are rising so fast the gains outstrip salaries of the owners.

I understand from Fred Harrisons research these cycles have been on going for about 200 years.

Your friend will win out in the end and you will regret not having bought!

HM

[Mr Punter]

Stratford is pretty awful. It has been talked up for years but has never done much better than anywhere else. Having said that, I know a guy who did pretty well over several years buying up terraced houses in the area, formulaically spivving them and selling them on.

Ex Olympic sites do not have a particularly happy history.

[RufflesTheGuineaPig]

They had the boom a number of years back.

As soon as the 2012 bid win was announced, speculators went in and bought up the houses/land that would be needed for the olympic site. Most of the houses were run-down or vacant shells. The speculators bought them at a bargain price and sold them again at a massive profit.

This is the sole reason the cost of the olympics increased by several BILLION pounds... that cash went straight into the pockets of land speculators.

[London2012]

They had the boom a number of years back.

As soon as the 2012 bid win was announced, speculators went in and bought up the houses/land that would be needed for the olympic site. Most of the houses were run-down or vacant shells. The speculators bought them at a bargain price and sold them again at a massive profit.

This is the sole reason the cost of the olympics increased by several BILLION pounds... that cash went straight into the pockets of land speculators.

I think it will either flourish and turn into a nice area, or deteriorate into a ghetto depending on the economy and the success of the Olympics and post Olympics developments

[miko]

Stratford was a sh-t hole is a sh-t hole and even with the olympic village the rest of it always will be a sh-t hole.

If you don't agree take a drive or better still a walk around the centre and drive off the Romford road leading up towards West ham and Ilford , you really see what a dump it is .

Added to that there is a massive oversupply of new build boxes in east london. A few years back I read a report that The boroughs of Newham ( which covers Stratford ) Tower Hamlets and Southwark just over the river had granted planning for a massive amout of new build falts , these are now being built and coming up for completion.

We are already seeing that many off plan buyers are now unable to complete on these purchases as the prices have dropped and the mortgage companies have lost faith in new build flats.

As the boom intensefied the developers got away with charging more and more for smaller flats , compare flats in Docklands being built now and those built ten years back the older ones are much bigger in less densley cramped developments all had parking and space around the blocks the sh-t being shoved up now in Docklands , Stratford and the rest of East London does not compare to the older developments.

I think that your freind will have a very long wait. In 1993 I bought a one -bed river front flat in Surry Quays for £50,000 five years prior someone else had paid £150,000 for that very flat . I see the same thing happening with new build fats this time around but it will take longer for the prices to recover this time around as there are far far more flats involved this time , and wage inflation is nothing like as high as it was after the last crash.

[Cygnus Alpha]

Hi All,

First post on these forums and I thought I'd dive straight in. I was actually searching for info on buy to let investments +2010 +Stratford and came up with a indexed post from 2006 in this very forum and I thought why not come in and have a chat.

A friend of mine has bought property in East London, very close to the Olympic Village area, her investment strategy is a little simplistic for my liking and she only has one option which is capital growth because she bought at near to market value and the rental yield is low or zero after costs.The property is a two bed which is already refurbished, so no option to add value and sell. Recenlty over dinner as politley as possible I tried to let her know there was various potential pitfalls to her strategy, in fact the real truth is I see it as more of a gamble than an investment in her case. For my money I'd always want some yeild in an investment, even if its long term captical growth where the real value lies. Especially in this area, and here is why.

My worry is that many pro/amatuer investor have speculated on this area, all the ingredient for long term capital growth are there I grant you. Massive investment in infrastructure, biggest park in Europe, sporting facilities etc, with all the long term benefits which come with it, buying property and waiting for capital growth in the long term can't go wrong. Its a logical argument.

Here is what I suspect is likely to happen and I'm interested to hear others opinions:

The Olympic Village will provide 17,000 beds for athletes and officials during the Olympic Games and 7,500 in the Paralympic Games. After 2012, it will leave the legacy of up to 3,500 new homes, many of which will be affordable, with the new communities supported by new parks, open space, community facilities and transport links. Source: london2012.com.

I have personally seen large blocks recently built on Wick Lane where there is due to be a footbridge into the village, so there are now two large blocks on that street with several around the back of Hackney Wick, a couple of these are laying empty at the moment and not being offered for sale. Across the A12 on Tredgar Road, is another large estate of flats. And three other blocks being build as I type. Go south Down the A12 to the round a bout towards Startford and you'll find another recently completed block. From the round a bout up the high street to Stratford, there are loads of blocks completed and being build. Further down again by Bromley By Bow there are also blocks complete and in the process of being built. I have not been further East to the other side, so I am not sure if there is further residential developments that side but without finding the stats, its clear there are thousands of new homes/flats that have been built in the area over the past few years and in production now.

If you search the renting ads you'll find there have been rooms for rent in these blocks almost constantly for months, giving a strong signal that many are owned by buy to let landlords (BTLL). Plus I am sure that many BTLL have bought up conversions and older housing in the area too. So with the release of all the Olympic residential developments, the new builds and existing property in the area which has been snapped up as investments there is literally going to be thousands of properties avaliable for rent in the area.

I find it hard to imagine how this will not mean that after 2012 there is going to be a big over supply of rental accommodation onto the market, meaning downward pressure on rental yields and potential for BTLL to have property that is either making a loss over their costs or worse still void for months on end. Amateur investors who do not have sufficient yeilds to cover reduced rents, have not put money away to cover potential losses or can't cover them from other incomes maybe forced to sell, meaning they'll be increased supply of property for sale too. I would be surprised to think that demand will match supply in the short to medium term.

Be interested to hear your thoughts on this?

Cheers,

Nick

Nick, personally I think your friend is going to be ok in the long term but it is clear she has no idea of the risk she is taking on.

First of all what if rents fall, what if she suffers a rental void, what happens if interest rates go up. It is all very well that her investment will come good in 15 years time. But any of these events in the short term might mean her investment doesn't last 15 years.

[@contradevian]

I think it will either flourish and turn into a nice area, or deteriorate into a ghetto depending on the economy and the success of the Olympics and post Olympics developments

My money is it decending into sh*tdom, which it is already.

[fallingbuzzard]

Offloaded all my investments there in 07 and 08. The Olympic effect was already factored in to prices. There always has to be a cheap area in London and its always going to be the East. 2008 prices on terraced houses were 15x prices in 1985. Looney land!

Edited January 19, 2010 by fallingbuzzard

[@contradevian]

Offloaded all my investments there in 07 and 08. The Olympic effect was already factored in to prices. There always has to be a cheap area in London and its always going to be the East. 2008 prices on terraced houses were 15x prices in 1985. Looney land!

Be interesting to see what Ballymore do. Some of their sites (ie: Leamouth Peninsular and Bow Creek) are currently mothballed.

However it would only take them a year and bit to bung some high rise on, if the pace of Barratt development are nearby East India was anything to go by.

Edited January 19, 2010 by TheReturnofRover2000

[AteMoose]

Look at the athens 2004 olymipc site. The reality of an Olympics is the great cost/debt means the site cannot be maintained and it quickly falls into disrepair, the economic boost fails to materialise:

http://www.dailymail.co.uk/news/worldnews/article-1036373/Abandoned-derelict-covered-graffiti-rubbish-What-left-Athens-9billion-Olympic-glory.html