Is London’s Nine Elms the next Canary Wharf?

There are few Londoners who won’t know that Battersea Power Station is at last being converted into a mixture of flats, shops and other amenities following a frustrating, 30-year wait to find a saviour.

But while a Malaysian company pumps millions into this old smoker, few realise that Battersea Power Station is merely one part of a London’s South Bank regeneration that will, when completed in 2022, overshadow Canary Wharf in both size and ambition.

Nine Elms, currently best known for its sprawling Sainsbury’s and Post Office sorting centre, is to become a 450 acre ‘village’ running from Vauxhall Bridge down to Chelsea Bridge. The arrival of the new US and Dutch Embassies in 2017, with other countries expected to follow, will also make it the capital’s new diplomatic quarter. And it will include 18,000 extra homes, two new tube stations, a £45m upgrade to Vauxhall train station, a £1bn extension to the Northern Line, 50 acres of new public space and two new schools.

Parallels with the late 1980’s redevelopment of the Isle of Dogs and the creation of Canary Wharf are clear. Both have a similar footprint, a singular purpose as new ‘quarters’ (diplomatic and financial), are on under-valued river frontages, benefit from improved transport links and feature major new office developments.

Nevertheless, will Nine Elms really prove to be a good investment? Two-bedroom flats within Canary Wharf are reported to have sold for an average of £40,000 in 1985; the same properties now sell for approximately £500,000. This, even if you use the most critical way to evaluate property investment – Compound Annual Growth Rate – delivers a rate of 9.44% over the past 28 years, much better than the overall London rate of 6.82%* and substantially greater than the national rate of 5.86%*.

Prices in the Nine Elms area today range between £650,000 for a two-bedroom apartment in an existing development (built within the past ten years) and £850,000 for an off-plan two-bedroom apartment within one of the new developments.

If Nine Elms delivers the same performance as Canary Wharf and you are prepared to be patient then a £850,000 property today could be worth some £10.63 million by 2043. Such a likely value isn’t so outrageous given the luxury off-plan penthouses in Battersea Power Station are already for sale at £6 million or more.

But few people invest in property or even own a home for such long periods. Nevertheless it’s clear that places such as Nine Elms outperform other parts of London and do so because central government, local councils, developers, businesses and many other movers and shakers all have a vested interest in their success.

Canary Wharf has already delivered such extraordinary price rises since it was built for this reason and we expect to see the same for Nine Elms, which is located considerably closer to the heart of London.

 

* Nationwide regional data

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