The recent rebirth of Battersea Power Station has firmly placed SW11 as the poster boy of South London regeneration. And the fate of the Power Station has become entwined with the fortunes of the neighbourhood. The promise of money being poured in has been a catalyst for wider regeneration, attracting a ripple of investment along the south west bank of the Thames.
Market profile
With the cranes departing, Battersea and Nine Elms have joined the ranks of large London regeneration revivals, like Kings Cross and Canary Wharf.
Its success was cemented by the arrival of Apple’s European head office and the opening of the Northern Line extention. While some may say the new tube has been overshadowed by the opening of Crossrail, its impact has been as transformative. It has stretched Zone One across the river, halving journey times into the West End by removing the need to jump from train to tube.
The impact of putting both Battersea and Nine Elms onto the tube map has been to attract new locals from more traditional prime markets across the river - Pimlico and Sloane Square in particular. Tenants have been faster than buyers to embrace new Zone One postcodes, attracted by homes in short supply in more established areas that include concierges, gyms and swimming pools.
Back in the late noughties when the first housebuilders were breaking ground, the London market was in a different place. And these developers couldn’t have timed the market better, with buyers queuing to put down reservation fees on new homes in a little known former industrial neighbourhood by the Thames.
Our estimates suggest that just over three-quarters (77%) of the new homes completing in 2016 had been reserved off-plan, properties which had been launched during 2013 and 2014 when the redevelopment first kicked off. While this figure fell to just over 40% last year, it reflects a new normal with homeowners replacing both overseas and domestic investors.
Prices today stand around 24% below the Prime Central London (PCL) average, a gap which has been narrowing. Cheaper prime or prime fringe markets like Nine Elms have been some of the strongest performers so far this year. Average values here are broadly on par with where they were in 2016, while PCL values have fallen 8.3% over the same period on a £psf basis. Today values are hovering at £957psf, just below the £1,000 benchmark which is widely considered the entry point to prime markets.
Rental Values
The off-plan nature of most purchases pre-2016, typically meant heavy buy in from investors, with 80%+ living overseas. Middle and Far Eastern buyers, in particular, bought on the back of strong London price growth which has since cooled. But while prices haven’t increased much, rents have. Consequently, many investors have seen yields rise significantly over the last five years.
While rents were hit hard by Covid, they have recovered strongly as the international markets reopened, attracting students from East Asia who returned in vast numbers. Across SW11 rents peaked last October, and since then, smaller one and two bedroom flats which had borne the brunt of the Covid induced slowdown have maintained this recovery as a result of young executives returning to London office desks after extended periods of working from home.
Despite plenty of new housebuilding, including a number of landmark build to rent developments, the number of homes on the rental market is 8% below 2019 levels. However, this fall is smaller than many other places. Whilst some of the original investors have now gone on to sell, stock numbers have been boosted by a growing number of build-to-rent schemes completing. Such schemes achieve 20-30% more than private landlords as they offer attractive lifestyle amenities marketed specifically to dynamic transitory tenants.
Today, there remains a heavy investor presence in all Nine Elms developments. Homes that are now being re-sold are typically being bought by UK nationals for personal or wider family use.
