East End Hipster Home Gains Beat West London in Price Fluxby
New builds in Aldgate are now 8% cheaper than in Kensington
Younger home buyers like edgy vibe on City of London fringe
London’s top earners are bypassing the millionaire enclaves of west London for homes on the fringes of the City of London financial district, causing the value of new properties to soar in areas favored by hipsters and technology workers.
The regeneration of Aldgate through Internet start ups, the opening of gastropubs and improved transport links has made the neighborhood popular with millennials who want to live near where they work. Cheaper office space has enticed companies including Uber Technologies Inc. and Aecom Technology Corp. to move to the area, a seven-minute walk from the financial district, boosting demand for homes.
Developers including Barratt Developments Plc and Redrow Plc rushed to erect residential towers in the neighborhood complete with 24-hour concierges, swimming pools and indoor cinemas as demand rose. The supply surge hasn’t damped price gains and new homes in the district now cost just 8 percent less than those in Kensington, one of the priciest areas of London, according to data compiled by Countrywide Plc. In 2011, the gap was 25 percent.
“Young professionals have flocked to the area because they can walk to work, it’s full of nightlife and still has that edgy authentic feel,” said Giles Hannah, a broker who specializes in buying and selling luxury homes in the U.K. capital. “Compare that to Kensington and Chelsea, which has nice schools and supermarkets but hardly anywhere to go out past 11 p.m.”
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Aldgate, scene of battles between Blackshirt fascists and Jews in the 1930s and 1940s, was previously known for housing projects, traffic and one of London’s busiest open air markets. Nowadays, tourists pass through the district on guided walks to retrace the steps of Jack the Ripper, who murdered five prostitutes in and around the area in 1888, and cocktail bars and coffee shops proliferate.
The regeneration of the district has coaxed buyers and investors to the housing market. The neighborhoods of Shoreditch, Spitalfields and Hoxton, a stone’s throw away with their pop-up shops, speakeasies and Michelin-starred restaurants including the Clove Club and Lyle’s, appeal to those looking to kick back after work without facing a long commute home.
“Prices have been playing catch up,” Johnny Morris research director at Countrywide said, “If you work in the City, it’s just so much easier to live in Aldgate.”
For some developers, however, that surge in prices mean the district is now less attractive as homes there are now unaffordable for many workers. It’s time to move on to other underdeveloped areas of east London such as Bow and Poplar, said Jon Di-Stefano, chief executive officer of Telford Homes Plc, which constructed the 12-story City Scape residential tower in Aldgate.
“We started that project in 2010 when the regeneration was just starting and prices were more accessible,” he said in a phone interview. “If you built it now, prices would just to be too high so we’re looking for new areas.”
Developers who started projects in Tower Hamlets, which includes part of Aldgate, have found it easier to find buyers than those in more affluent districts. About 70 percent of the 9,409 properties that started construction in the 18 months through July have been purchased, according to research by Molior London seen by Bloomberg News.
In the same period, only 29 percent of the 660 new properties that began construction in Kensington and Chelsea found buyers, the Molior research shows. A spokesman for the researcher declined to comment.
Purchasers in the more affluent borough have been put off by falling values, increased sales taxes and lower interest from overseas buyers after last year’s slump in commodity prices. That’s narrowing the gap in prices in the wider market. The difference between existing homes in Aldgate and those in Kensington and Chelsea has fallen to 46 percent today from 86 percent in 2012, the Countrywide data shows. The average selling price for a flat in Kensington in the past 12 months was 1.37 million pounds, according to broker Foxtons Group Plc. That compares to 642,500 pounds for Aldgate.
The surge in Aldgate home values is “the culmination of the move east by wealthy people who wouldn’t have lived in those areas 10 years ago,” said Marcus Dixon, head of research at real estate researcher Lonres. “Young buyers want that edgy vibe.”