Prime East of City – bankers and investors

Compared to the other prime London markets, Docklands and Canary Wharf have been slower to recover, both in terms of transactions and price growth.

Owner-occupier demand is heavily concentrated amongst those working in the financial and business services sector, who also tend to be in the earlier stages of their career, with less accumulated wealth and a greater reliance on income than capital (See Graph 1).

Historically, demand has been supplemented by relatively high proportions of domestic investors and pied-à-terre buyers, but these groups have been less evident recently.

The less diversified nature of existing stock, which is dominated by one- and two-bedroom flats, and the sizeable supply of available new-build stock have also played a part in keeping price growth to just 6.5% over the past 12 months to the end of March 2010.

However, unlike other markets, the strongest price growth during this period was seen in the first quarter of 2010 (3.3%) as investors, both domestic and overseas, and second home owners began to return to the market.

Outlook

The market is likely to be highly dependent on the position of London as a world financial centre, as well as the role of Canary Wharf within this context. Latest estimates from Oxford Economics suggest a further 6,000 job losses still to come in London’s financial sector over 2010, but this is a significant improvement on the 21,000 losses that were being predicted six months ago (See Graph 2).

Employment prospects are expected to be much more favourable in 2011, after which we expect growth to be supported by a relative dearth of new-build products as the development emphasis in the East of London shifts to Stratford.