Simon Morris has learned that Transport for London (TfL) will initiate a major new London property development project to raise the money for the UK capital’s public transport network.
The UK’s capital city has developed one of the most lucrative residential property sectors in the world. London’s house prices are rising all the time; the latest Rightmove Index suggested that the city’s average house price increased 9.8% in the year to October 2015.
This has spurred a wave of property development in London, as investors seek to capitalise on the city’s ever-rising house prices. Simon Morris recently noted that even Tesco has recently decided to enter the sector. The supermarket decided to sell a range of sites in London, Bath and the South-East, to property investment company Meyer Bergman for £250 million.
Now TfL has decided to follow in Tesco’s footsteps; according to the Financial Times, the public transport regulator has announced that it will build 10,000 homes across London. The organisation said that it has decided to take this step to raise more than £1 billion in funding for the UK capital’s underground system, buses and trains.
TfL owns 5,700 acres of land across 3,000 sites in London; they’ve shortlisted 75 of these sites across 300 acres for residential and commercial property development. Roughly two-thirds of these sites are located in the central zones one and two. Graeme Craig, TfL’s director of commercial development said that “this is only the first wave of sites. We are also looking at zones three to five, which we expect to bring forward next year and will be used to build more affordable housing for Londoners.”
Delivering more homes
The move was hailed by London Mayor Boris Johnson, who suggested that TfL’s plans would expand on the “great efforts” he’s spearheading to develop brownfield land. He commented that “it’s important that all key agencies work together to accelerate the rate of housebuilding across the capital and redevelop land and assets wherever possible to deliver more homes.”
But it may not be so easy for TfL to deliver the homes that London needs. The transport body has said that a number of the residential properties will be built above and around stations and train infrastructure, such as building above Bermondsey and Southwark Tube stations. However these sites are complex, and the developments will have to be constructed without impeding travel operations.
Return on investment
Despite these challenges, TfL stand a good chance of making an impressive return on their foray into London property development. High volumes of demand coupled with limited supply has ensured that investors often benefit financially when they develop residential property in the UK’s capital city.