Why savvy investors choose properties with the best views of the Thames

London homes with the best views of the River Thames command prices over a third higher than their neighbours off the river, according to new analysis from a leading international property consultancy.

Researchers at Savills studied all sales within 100 metres of the river last year, on a stretch between Teddington Lock to the west and Royal Docks to the east, and found the average price of a home with a direct view of the river was 18-20 per cent more than the average for properties within one kilometre of the river. 

A south bank location in central London commands the highest premium, with prices over a third (35.4 per cent) higher than neighbouring properties away from the river, with the average waterfront flat selling for £575,000.  Further away from the river the average selling price was just £425,000. 

However, the most valuable central London waterfront locations are found along the north bank, though the river view comes with a relatively modest 16.3 per cent premium relative to close neighbours. Here the average flat has a price tag of £960,000 but that compares to an average of just £825,000 within a kilometre of the river.

Unsurprisingly, the most affordable river views are found to the west and east of central London, where the average flat sold at just under £500,000.

“Average prices on the river suggest there is still some value to be had for waterfront locations compared to prime central London”, says Natalie Ingham, Savills residential research analyst.

“Over the next few years, the regeneration of areas such as Victoria and the development led growth around Nine Elms and South Bank – including Battersea Power Station, Riverwalk and the Shell Centre – will extend the boundaries of the prime waterfront market.”

Housing bubble theory blown out of the water – thanks to government lending schemes

There will not be a property bubble in the UK in the short term due to various government initiatives that will ensure affordability remains manageable, a leading UK estate agency said in November.

Chesterton Humberts also forecasts that national house prices will rise by up to 8.2 per cent in 2014 – ahead of a predicted 8.1 per cent rise in Greater London – and will average six per cent annual growth over the next five years. This growth will be sustained until at least 2016 by mortgage support schemes that prop up the lending market by allowing cheap mortgage credit and enabling more people to buy.

Nick Barnes, head of research at Chesterton Humberts, said: “2013 has marked the beginning of a recovery in the UK housing sector and I expect strong house price growth to continue throughout next year. However, I do not believe we will enter bubble territory as achieved price growth to date outside London has been modest and is sustainable for the time being thanks to the various government mortgage support schemes.

“Moreover, mortgage interest rates are likely to remain low at least until the General Election meaning that affordability should stay manageable for most households and current affordability measures from the Nationwide and Halifax are some way below – i.e. better – the worst periods of the last big recession in the 80s/early 90s.”

Chesterton Humberts also expects the North/South regional divide to persist in the New Year, as London, the South East and East Anglia continue to outperform the rest of the UK. The prime London market alone is predicted to achieve an average of 9.7 per cent annual growth between 2014 and 2018. This represents a 48.5 per cent increase over the next five years.

Prime central London prices continue to rise, driven by sub-£2million sector

Prime central London residential property prices increased by 0.6 per cent between September and October, and have increased by 6.2 per cent over the first ten months of 2013, according to a leading estate agency.

October’s monthly increase means that London’s best homes have increased in value month-on-month for three consecutive years. However, while the general trend was for prices to increase, in two of the markets tracked in the Knight Frank Prime Central London Index average prices fell on a monthly basis.

In Hyde Park, prime property values declined by 0.3 per cent, while along the South Bank the monthly fall in values was 1.4 per cent. In Belgravia, Chelsea, Kensington and St John’s Wood, prices ended the month unchanged from September. The biggest hikes in property prices in October came from City Fringe, Islington and Marylebone at 3.5 per cent, 1.7 cent and 1.5 per cent respectively.

The number of new applicants registering their interest in buying a home is 34.4 per cent higher so far in 2013 compared to the same period of 2012, and the number of property viewings is almost 15 per cent higher for the same period. Much of this rise in demand is targeted at the sub-£2milion market, where sales are 7.6 per cent higher in 2013 compared to the same period in 2012. Prices of sub-£2million homes have risen by 9.1 per cent over the first 10 months of 2013.

Meanwhile, prices for homes valued from £5million to £10million, and £10m+ have increased by 3.8 per cent and 2 per cent respectively in 2013. The higher stamp duty charge for £2million-plus properties, introduced at last year’s Budget, remains a key driver behind stronger growth in the sub-£2million market, but the higher level of transactions at this level means stock levels for sub-£2million properties have fallen and are 21.6 per cent lower in October 2013 than in the same month of 2012.

House prices to rise nearly 20 per cent in the next five years

National house prices in the UK will rise 17 per cent during the next five years as the economic recovery gathers momentum, an international property consultancy forecast at the end of October.

The news follows an increase in optimism which has fed through to the national housing market, with mortgage approvals at their highest level since 2008, leading to over 62,000 requests approved during August 2013, reported CBRE.

The market will be boosted by help to buy, low interest rates and improvements in the mortgage market, with house prices in London, the South East and East of England seeing the most significant growth throughout the next five years.

London continues to witness an inflow of investment from overseas purchases, resulting in land across the region offering ‘easy trade’, added CBRE. While Government backed funding schemes have improved domestic mortgage markets and accessibility for all pricing levels, an emergence of house-builders and registered providers entering the market has made it all the more competitive, leading to an upward pressure on regional land values.

In the South East, activity in the land market has continued to increase when compared with Q2 2013. While previously unviable land is now re-entering the market, coupled with the National Asset Management Agency (NAMA) releasing further land opportunities, competition for target locations has generated a considerable increase in land values.

Jennet Siebrits, Head of Residential Research at CBRE, stated: “The continued improvement in lending conditions has been a significant factor in the increased demand across the UK property market. Notably, the Funding for Lending and Help-to-Buy equity loan schemes have proven particularly successful.

“The first phase of Help-to-Buy has achieved its objective of stimulating the UK property market, through delivering over 15,000 reservations since April of this year. We expect the second phase of Help-to-Buy to become a ‘game changer’ and therefore anticipate it will help in the region of half a million prospective buyers who are seeking to enter the property market.”