Tech City / Silicon Roundabout has established itself in recent years as the third-largest tech start-up cluster in the world. But it’s no longer just for start-ups, with global giants like Google and now Amazon moving in.
Amazon alone is taking 514,000sqft of office space in Principal Place in Shoreditch, proving it to be the hub of technology-focused, creative London.
Shoreditch, Clerkenwell, Aldgate and Whitechapel: over the last decade these places have become the breeding ground for media and tech start-ups, as well as larger blue-chip companies looking to grow their digital operations.
For the housing market, this means that demand in Shoreditch is consistently high and only getting higher as people want to work there and live there, too. The focus for developers has been shifting over the last ten years into the City and East London, and over the past five years in particular, we have seen schemes with similarly high specification, design principles and hotel-like amenities to those on offer in western parts of the capital.
Tech City and the wider Shoreditch area is now part of the Prime Central London market, and this seems to be spreading even further eastwards. Property prices in Hackney, for example, have grown by 13 per cent in the two years to April 2017.
As prime buyers are moving into east London, developers are forced to provide higher quality housing. According to our recent Knight Frank survey of prime buyers, 64 per cent said they were willing to pay a premium for a higher specification – namely, better quality of materials, kitchens, storage, fixtures and fittings and communal spaces.
By last month this had closed to a 13 per cent gap, with Hackney’s average of £562,638 nearing Islington’s £637,347.
Paula Higgins, chief executive of the HomeOwners Alliance, which campaigns for broader home ownership, said: “Buyers in London are increasingly setting out their key criteria and then letting their budget dictate where they purchase… however, it is worth sparing a thought for younger buyers who are totally priced out of vast swathes of the London market and can’t afford to act on location or property.”
However, will this trend continue and can the Tech City help maintain prices? Leading economists have warned that the UK is heading for a collapse in house prices not seen since the early 90s which risks plunging homeowners into negative equity.
“We are due a significant correction in house prices. I think we are beginning to see signs that correction may be starting,” said Paul Cheshire, a professor of economic geography at the London School of Economics, speaking to the Mail on Sunday and warning that they could fall as much as 40 per cent.
“If Brexit leads to a recession and/or sluggish growth for extended periods, then an extended and severe downturn is more likely than a short-lived and mild one,” added fellow LSE professor Christian Hilber.
Figures just last week revealed that more than three-quarters of homes are selling for under the asking price, according to the National Association of Estate Agents (NAEA). Separate research from Rightmove suggested house prices fell in June – the first time since 2009.
The Bank of England has also warned of the risks in London’s commercial property market, saying it is “vulnerable to repricing” in its financial stability report last week.
DMZ thinks London will see a price inflection over the next 18 months but the long term buyer will see these prices reverse.
The capital is an economic powerhouse and will continue to attract foreign investors due to the favourable tax environment, relatively weak sterling and world-class schooling system. Coupled with the brightest English minds from tech titans like Google and Facebook in addition to the thousands of ‘unicorn in waiting’ start-ups; talent will remain in the Capital leading to a long term stability and future tech investment.