Delays to the new rail infrastructure could be a great investment opportunity
A few weeks ago, Transport for London (TfL) announced that Crossrail 2 could be delayed as funding issues begin to rear their ugly head. In the Autumn Budget, Chancellor Philip Hammond mentioned Crossrail 2 as a key infrastructure project. During December, talks about funding the project is taking place.
In this article, you’ll learn why delays to the Crossrail 2 project could be the opportunity that savvy property investors will take advantage of.
Crossrail 2: what is it?
Most people have heard of Crossrail 2. It’s a massive infrastructure build that will slash travel times across London and the South East. It will help ease congestion and overcrowding. Surrey County Council has called the project “a once-in-a-lifetime opportunity”, and a “key priority” to power economic growth.
But it’s not only authorities in the South of England that want Crossrail 2 to be completed as quickly as possible. For example, the bosses at HS2 – a major driver of property investment opportunity in cities like Birmingham, Manchester, and Leeds – are urging funding issues be resolved quickly. They believe that any delay to Crossrail 2 will cause bottlenecks at Euston station in London.
Crossrail 2: why the possible delay?
Two issues could force a delay in the completion of Crossrail 2:
- First, the estimated cost has increased from £31 billion to £45 billion.
- Second, and considered most important, there are now question marks over who will foot the bill, and how.
Originally, it had been planned that the government would fund the project, and TfL would then ‘buy back’ Crossrail 2. Now, the government want TfL to meet half the costs during construction. It is the real sticking point. TfL has said that such an arrangement could delay project completion from 2033 to the 2040s.
What might be the outcome of Crossrail 2 talks?
There are several possible outcomes of the Crossrail 2 funding talks. These include partial funding, phased openings, a levy on businesses to help pay for the new infrastructure, or the government reverting to previous funding arrangements.
Whatever the outcome, the conclusion of the talks is only the first step to resolving the issue. In the new year, consultation will begin to get funding, and exact plans passed through Parliament by 2020.
What effect might Crossrail 2 have on property investment?
Crossrail 2 is tunnelling north to south across the capital, complimenting the east-to-west route of Crossrail 1 (the Elizabeth line).
To assess what effect Crossrail 2 may have on property prices near Crossrail 2 stations, we only have to look at the Elizabeth line experience. The so-called ‘Crossrail effect’ produced some incredible profits for investors who got in early. Since Crossrail was announced, property prices near all 40 stations along its route are up by more than 40% in 10 years. Tenant demand has rocketed, too.
We already see this kind of price movement along the Crossrail 2 route. Since it was announced in 2013, tenant demand is up. Investors have helped to push up property prices in most of the 15 boroughs that will have a Crossrail 2 station. Some rents have increased by more than 20% in less than five years, as have many property prices along the route.
What might a Crossrail 2 delay do to property prices on its route?
One of the fundamentals that drive property prices and rents higher is the investment in transport infrastructure. People need to be able to travel to work, and for leisure too. Property prices and rents tend to increase fastest and highest where infrastructure upgrade is planned.
Prices and rents where Crossrail 2 is planned have already jumped. A delay could see a slowdown in the pace of price growth, as demand will be delayed, too. But this isn’t necessarily bad news. There’s a double-edged sword here:
- Those who have already invested may have to wait a little longer to realise the profits they had anticipated.
- Those who haven’t invested, have got a second chance to do so.
When should you invest to benefit from Crossrail 2?
When infrastructure is upgraded, it becomes the catalyst for regeneration. The potential of previously derelict and neglected areas becomes apparent. This combination of development transforms locations, and the effect on property prices and investment potential usually takes place in three distinct phases:
- Phase one is when the announcement is made. Prices spike as investors buy in anticipation of demand.
- Phase two is upon confirmation of plans and funding.
- Phase three is continuous, as demand builds ahead of confirmation and then builds as completion approaches.
For investors, a delay in completion could slow down the rate of growth of property prices along the Crossrail 2 route. However, when the funding is confirmed (which could be in the next few weeks), we wouldn’t be surprised to see renewed interest in Crossrail 2 locations. Then we would expect property values and rental prices to continue to creep up.
Property investment is a long-term game. Property investment along the Crossrail 2 route could prove to be one of the most profitable of long-term games.
To discover more about our current off-plan property for sale in London, contact one of the team on +44 207 923 6100. We’ll be happy to discuss the best places to invest to take maximum advantage of Crossrail 2, whatever the outcome of the talks between the government and TfL.
Live with passion
Brett Alegre-Wood
