Where to buy a property in London in 2016: the south-east London homes hotspots to watch

South-east London is climbing the property ladder fast, thanks to quick overland rail links to the centre and good-value property prices. We get the lowdown on the up-and-coming areas where buyer's budgets can stretch up to twice as far.

Once considered a Tube-starved corner of London best ignored, the SE postcodes are being opened up to home buyers and renters by vastly improved transport links and the affordability of property.

Despite recent price hikes in south-east London, in general, property there is still significantly lower than districts to the north or west of the capital.

The extended East London Line, part of the Overground network, has brought areas such as Forest Hill and Sydenham in from the cold.

Crossrail will be a game-changer for Woolwich and bordering areas such as Charlton, while the proposed Bakerloo line extension from Elephant & Castle via Catford to suburban Kent, the capital’s next major Tube upgrade, is already causing property ripples.

SOUTH-EAST LONDON: THE LOWDOWN

South-east London stretches from Bermondsey to Beckenham, from Woolwich to West Norwood, and includes some buzzing Zone 2 districts close to the main employment hubs of the West End, City and Canary Wharf.

Hampstead and Primrose Hill in north London may be incomparable, but south-east London has leafy town-and-country equivalents.

Blackheath occupies a high plateau alongside majestic Greenwich Park and has a village centre plus private roads with detached houses in big plots. Developer St James is working on a scheme of 30 homes on the site of a former car showroom moments from the village.

Dulwich — “near but so far” could be its motto — has a duck pond and cottages, a picture gallery, working tollgate, renowned private schools and a golf course.

And beyond the snaking South Circular Road are underrated inner suburbs such as Shooter’s Hill and Crystal Palace.

Most south-east London areas are connected by quick overland rail links to the centre. There is plenty of open green space, a seemingly endless stock of Victorian and inter-war terrace houses that can be reconfigured for modern living, plus a swelling number of new housing projects as developers tap into rising demand.

“A lot of buyers have pre-conceived ideas about south-east London, but there are more and more converts, including cross-river movers,” says Huw Davies of estate agent Caddington Blue. “When they discover up-and-coming areas like Brockley and Nunhead, they’re taken aback by the value for money they can get — and how nice these areas can be. Similar homes north of the river can cost twice as much.”

So buyers are realising they can get a property twice as big for half the price and still get to work quickly.

One hot address is Telegraph Hill,  just south of New Cross, which has six-minute trains to London Bridge. Large Victorian semis priced up to  £1.5 million are attracting City people, doctors and lawyers from other parts of London. These houses sit in wide roads and have at least 2,000 sq ft of space plus a 100-ft long garden.

A rare new-build scheme in Gellatly Road includes one property with a lovely roof terrace offering panoramic views of the City. Priced at £875,000. Call 020 7407 6033.

THE BAKERLOO LINE EXTENSION
The Bakerloo line extension will run through new tunnels either along Old Kent Road or via Camberwell to New Cross Gate, then on to Lewisham and via Beckenham to Hayes. A spur to Bromley town centre is also being considered.

Trains will start operating after 2025, meaning there is a wait, but the point is that the extension will cement the future of this up-and-coming swathe of London. People who want to put down roots are factoring the transport upgrade into buying decisions.

OLD KENT ROAD: ONE OF THE MAYOR'S "OPPORTUNITY AREAS"
A new “opportunity area” designated by Boris Johnson covers Old Kent Road and the corridor of land either side of it. Already new housing is sprouting up. Bermondsey Works is a 147-home scheme by Telford Homes. Call 01992 809800. The Bath House has 27 apartments. Call Higgins Homes on 020 8003 0613.

MORE SOUTH-EAST LONDON SPOTS TO WATCH
Other areas on the rise include Ladywell, which has acquired “village” status following streetscaping improvements and the opening of a deli and other independent shops, and Brockley, where bars and eateries, organic food cafés, delis and a micro brewery are clustered around the train station. Under way here, too, is a scheme of new apartments.

The main conservation area is a network of wide, tree-lined avenues surrounding Hilly Fields, a green expanse where parents cluster with daughters attending Prendergast secondary school, situated alongside the park. Many of the vast Victorian houses have been split into flats, but increasingly they are reverting to single residences, along with more modest flat-fronted, semi-basement terrace homes.

Sydenham Hill rises sharply from leafy Dulwich before coming to a halt on the high ground of Crystal Palace. There are few better vantage points of the City. Coming soon at St Clement’s Heights is a scheme of 26 apartments, 20 houses and 50 charitable almhouses (for older residents “of little means” of Westminster and Lewisham ) on a six-acre estate. Crest Nicholson, the developer, is also redeveloping the former Dylon textile factory at Lower Sydenham into 223 apartments.

While some people doubt south of the river will ever catch up with north London, it seems inevitable that even the most unloved SE postcodes will get smartened up at some stage. Such areas may be the best ones to look for properties if you can play the longer game.

A FRESH TAKE ON DOCKLANDS
The Canary Wharf business district has increased the allure of south-east London addresses. Rotherhithe, on the opposite bank of the Thames, has been a big beneficiary. The former docks area is undergoing a second wave of regeneration and is growing in status.

The Jubilee line and a Thames Clippers river bus service already connect Rotherhithe to Canary Wharf. On the horizon is a pedestrian and cycle bridge, one of 13 new river crossings planned by Transport for London. The bridge will be a convenient conduit for bike-riding and walk-to-work commuters, boosting Rotherhithe’s draw.

“The area is being discovered by a new generation of young professionals priced out of Shad Thames and  Borough,” says James Hyman of estate agents Cluttons.

“It’s in Zone 2, and negatives such as a lack of neighbourhood shops and bars are being eliminated.”

One telltale sign of its growing popularity is the jump in passenger drops reported by taxi firm Addison Lee. Rotherhithe/Bermondsey is the capital’s “destination hotspot”, with a 170 per cent increase in journeys over the past three years.

Canada Water is the main hub, effectively a new town centre for Southwark an improved public space, a splendid new library and smart apartment schemes creating 4,000 new homes.

Property giant British Land is transforming 40 acres of land (5.5m sq ft of new development) that includes outdated Surrey Quays Shopping Centre and a redundant printworks.

Sellar Group, whose Shard of Glass is a short hop away, has unveiled plans for 1,046 homes ranging from studio apartments to townhouses, alongside restaurants, shops, cinema, a public square and dock basin. Visit sellarcanadawater.com. Notting Hill Housing is a development partner.

Launching soon is Quebec Quarter — 151 apartments, some for shared-ownership. Call L&Q on 0844 406 9800.

Anchor Point in Salter Road is another new scheme. Two-bedroom apartments cost from £550,000. Call Kalmars on 020 7940 7980.

Housebuilder Barratt has a big presence in this area. Furnished penthouses at 19-storey Oslo Tower cost £799,000 and come with a parking space and a £23,970 stamp duty  contribution. One-bedroom flats at Greenland Place in Deptford cost from £335,000. Call 0844 811 4334.

ON THE CUSP OF ZONE 1: WALWORTH
Walworth is a remarkably uncelebrated and undervalued district on the  cusp of Zone 1. It’s so close to the centre that it gets into the large print pages of the A-Z.

Two of the area’s sprawling post-war, rundown council estates — Heygate and Aylesbury — are being redeveloped, which is helping to change perceptions, while investment is spilling over from Elephant & Castle regeneration.

Colourful and quirky East Street Market and Sir John Soane’s Church of St Peter at Liverpool Grove are among the area’s attractions, while behind the gritty high street are period gems, such as Sutherland Square and a Church Commissioners’ estate of charming terrace houses.

BASE17, so-called because of the area postcode, is a new scheme of 140 apartments overlooking a small park. Prices from £450,000. Call KFH on 020 3792 6073.

Nearby Harvard Gardens has 147 new flats launching in February. Call L&Q on 0844 406 9800.

A former council depot and listed public baths at Manor Place is being redeveloped into 270 homes by Notting Hill Housing.

Park View in Brandon Street is a boutique scheme of nine apartments, including a penthouse with a huge terrace priced at £795,000. Call  020 7407 6033.

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What does Brexit mean for house prices? If we leave will it solve the housing crisis?

What would a vote to leave the European Union mean for homeowners and those trying to get on the ladder? 

As outlined below, many economists and politicians believe house prices will slump should Britain vote to leave the EU, driven lower by falling demand. At the same time, it is argued that the shortage of housing in the country won't improve because a Brexit will sap investment into new homes and curb immigration of much-needed skilled workers into the construction sector.

However, the big caveat to bear in mind, whatever side of the fence you stand on, is that these figures are based on big assumptions. No one actually knows what will happen. Forecasters, from the Treasury to the IMF, very often get their figures wrong. Moreover, statistics can be manipulated. Prices in the property market are really based on confidence, and that is something that cannot be easily predicted by economists.

So, what are the numbers?

Several figures have been bandied around by various politicians and commentators. George Osborne, the Chancellor, warned that house prices could fall by 10pc to as much as 18pc by 2018 in the event that the British people vote to leave the EU. However, the calculation used to determine the rate of decline is based on today's house prices, rather than prices in two years' time, which are forecast to be about 10pc higher than they are today. If you account for that, the worst-case Brexit scenario would be an 8pc decline in prices, according to the Treasury.

Ratings agency Fitch has said that house prices could crash by25pc in the event of a Brexit, and added that the value of sterling would drop by nearly a third against a basket of other currencies by the end of 2016.

This would bring house prices back to a more affordable level. Fitch said: "UK house prices are currently up to 25pc above 'sustainable' levels in relation to disposable income. This scenario could result in near-term price declines that result in house prices falling towards their sustainable level." 

A report by the Centre for Economics and Business Research forecast that leaving the EU could reduce the total value of UK housing by £26.5bn by 2018.

Why are people saying house prices will fall as a result of Brexit? 

Mark Carney, governor of the Bank of England, has said that a vote for Brexit “could possibly include a technical recession”, and said that mortgage costs for homeowners could rise even if the Bank cut interest rates to boost demand.

If there is a recession and banks won't lend, or if buyers lose confidence in the market, there will be less demand and therefore prices will come down. 

The International Monetary Fund said that it could trigger “sharp drops in equity and house prices, increased borrowing costs for households and businesses, and even a sudden stop of investment inflows into key sectors such as commercial real estate and finance”.

This is due to a period of uncertainty and volatility that would follow a vote to leave, which the IMF said would lead to "financial market volatility and a hit to output".

Osborne: Brexit could cost 820,000 jobsPlay!00:56

Where will be the hardest hit?

London, by far, according to some analysts. It is a volatile property market, and more prone to external shocks.  

A report by ratings agency Moody's said that a Brexit would have the biggest impact on the capital's housing market, and would lead to fewer sales to EU nationals in central London, which would lead to lower house prices.

It also said properties worth more than £1m would be most affected; 49pc of homes in this band are bought by foreign nationals. 

Richard Donnell, head of research at Hometrack, has forecast a 5pc to 10pc fall in the number of houses bought and sold in the UK in the next two years if we leave the EU. But this is the new normal for London: last year the number of transactions fell 7pc due to affordability constraints and weak overseas demand.

It's reached silly season in the referendum campaign CREDIT: CHRISTOPHER FURLONG/GETTY

Conversely, if the pound falls, London may become an even more attractive market for foreign buyers, because their money can go further. Luxury homes in London are largely bought by non-EU foreign nationals, who would not be affected by any immigration clampdown.

Will it mean lower prices for first-time buyers?

If London becomes less attractive as a place to live after a Brexit, or if immigration is curtailed upon the event of leaving the EU, competition for housing would decrease, said Moody's.

This would slow down house price inflation and rental growth, so first-time buyers would benefit.

Having said that, if a Brexit does lead to an economic crisis, restricted mortgage lending and job losses, it will affect young people the most. So even if prices fall, affordability will not necessarily improve. 

How will you vote?

What about rent prices?

If many foreign nationals who live in the UK have to leave as a result of stricter immigration laws, this would lessen the competition for rental properties and so, in theory, lead to lower rents. 

This would affect London the most, where 37pc of residents are foreign-born nationals (figures from 2014), and 11pc of the population is from the EU. 

Foreign-born nationals are three times more likely to be renters than British-born residents, according to the Migration Observatory. 

Brexit may also lead to a reduction in demand for rented homes from the 125,000 EU students attending universities in UK, which could lead to lower rents in cities with big student populations such as Manchester, Birmingham and Nottingham.

But Brexit may cause a supply crisis in the rental market: if landlords are unable to afford higher mortgage repayments due to worse economic conditions, they may sell up.

Will Brexit solve the housing crisis?

There is currently a housing crisis because there are not enough homes. The Government pledged last year to build one million homes by 2020, but it's way behind target. 

Voting for to leave the EU will not magically increase supply, even if it prices do fall. In fact, it might slow it down construction of new homes: Moody's has said that an 'out' vote risks causing a major shortage in skilled construction workers.

Currently, about 12pc of construction workers are EU nationals. Hansen Lu, of Capital Economics, said: "Given that it takes years to train skilled tradesmen, immigration reflects the easiest route to meeting the current labour shortage. Thus, if it compounded existing labour shortages, Brexit could have a lasting, dampening effect on housing starts."

Boris Johnson: future brickie? CREDIT: JULIAN SIMMONDS

A  Brexit may also hold back investment into new developments. A recent poll by KPMG of 25 global real estate investors with assets under management of more than $400bn revealed that two-thirds believe a Brexit would result in less investment into UK property.

However, Simon Rubinsohn, the chief economist at the Royal Institution of Chartered Surveyors, said that house prices would continue to rise because of sheer demand. 

He said: "All indications suggest that whatever the outcome of the...referendum, in the long term, the imbalance between demand and supply will still exert a strong influence on the market, with house prices expected to rise by close to 25pc over the next five years.” 

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Lenders are charging higher interest rates for development loans for London luxury homes as slumping commodity prices and increased taxes deter overseas buyers, fueling concern the market is oversupplied.

Debt funding construction of the costliest homes has increased by about 75 basis points to 3.75 percentage points over benchmarks since January, said Randeesh Sandhu, chief executive officer of residential development lender Urban Exposure Real Estate Plc. For large projects in central London, financing costs have risen the most since 2012 over the past six months, said William Newsom, a senior director at broker Savills Plc. A basis point is 0.01 of a percentage point.

“Everyone is freaking out,” Sandhu, whose firm has loaned close to 1 billion pounds ($1.4 billion) to developers, said in an interview. “There has been nervousness for a while in the super prime market and there is also now nervousness in prime."

Developers are constructing or plan to build about 54,000 homes in central London, according to data compiled by researcher Lonres last year, just as demand and values fall. Home prices in the U.K. capital’s best districts fell the most since June 2009 in the six months through February, according to broker Knight Frank LLP, as higher stamp duty sales taxes and turmoil in financial markets deterred buyers. The stamp duty for a 7.5 million-pound residence to be used as a second home is now more than 1 million pounds.

‘On Its Knees’

The sales market for homes valued at 2,500 pounds a square foot or more “is on its knees,” said Mark Posniak, managing director of Dragonfly Property Finance, a lender which has advanced almost 2 billion pounds to borrowers since 2008. “When you start talking about stamp duty going over 1 million pounds on a property, it cripples the market.”

Dragonfly is now avoiding financing the development of the largest and the most expensive luxury homes, Posniak said in a telephone interview. It has also reduced the amount it will lend for the construction of a luxury homes project from around 85 percent to 80 percent, he said.

Pluto Finance (UK) LLP, the specialist high loan-to-value lender backed by funds managed by Blackstone Group LP, has avoided advancing credit for projects in central London since 2013 because of oversupply fears and the market’s dependence on overseas buyers, co-founder Justin Faiz said in a telephone interview.

‘Brexit’ Threat

“The mainstream lenders appear to be very cautious and I think with ‘Brexit’ on the horizon no one wants to push the boat out too far,” said Dragonfly’s Posniak, referring to the U.K.’s vote in June about leaving the European Union political bloc.

Land values in central London’s best districts fell 0.2 percent last year compared with a 24 percent gain in 2014, according to Knight Frank. Sales of homes under construction in the U.K. capital dropped 19 percent to about 5,216 in the fourth quarter from a year earlier, data compiled by researcher Molior London Ltd. show.

Average interest rate margins for U.K. housing developments fell to 381 basis points from 453 basis points in the 12 months through June, according to a survey of lenders by De Montfort University.

Reduced Appetite

Some U.K. banks have a reduced appetite for development loans because they are required to hold significantly more capital against that type of credit compared with investment property, said Ion Fletcher, finance policy director at the British Property Federation. 

Barclays Plc is continuing to lend to high-end developments based on each project’s merits, said Brendan Jarvis, a managing director and head of real estate for Europe, the Middle East and Africa at the bank. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc declined to comment.

At least one small lender views the reduced competition as an opportunity. Fortwell Capital, a company backed by Christian Candy’s CPC Group Ltd, is hiring three staff to lend money to the luxury residential development market, according to spokesman Bob Burgess. Candy developed the One Hyde Park apartment project in Knightsbridge as part of a venture with closely held Waterknights.

By 

     Jack Sidders