Heathrow, property take-offs and hard landings

What effect will Heathrow’s new runway have on property prices?

The announcement that the government has approved a third runway for Heathrow took just about forever to make. Now it’s been achieved, the question on property investors’ lips is, “What will it do to property prices?” There’s a high probability that the airport expansion will be good for many, but bad for others.

Here I look at how the local property markets might react in the coming months and years, drawing on local knowledge and opinion. It should help you decide on the best places to invest as you digest the latest property investment news.

Heathrow – a ‘great deal for business’

Described as a “momentous decision” and “a great deal for business”, the economic effect of a new runway at Heathrow could be far-reaching. It’s going to improve connectivity to the UK. And should make it easier for British businesses to export. Better connectivity should increase trade across the wider economy.

Closer to Heathrow, the expansion should create jobs during the construction phase. Local trade will improve both during and after the runway has been built, which should increase employment opportunities. Extra demand for housing should follow.

Industry moguls and analysts have welcomed Heathrow’s expansion:

  • David Sleath, SEGROChief Executive, said, “Giving the go-ahead for a third runway would provide a shot in the arm for the many established businesses and SMEs across the UK that rely on access to international trade markets.”
  • Adam Hetherington, London Managing Director at CBRE, predicted it would boost demand for office and industrial space near the airport.
  • Gerry Hughes, CEO at Bilfinger GVA said that the expansion “safeguards the economic powerhouse that is the M4 Corridor − one of the most significant concentrations of knowledge-led businesses in the world.”

Is Heathrow expansion good for property investment?

If you’re a property investor that invests in commercial property, the probable growth in the local economy is certainly good news. Even though it could be 18 months before expansion plans are finalised (and Sadiq Khan, the Mayor of London has vowed to fight the decision), demand for offices and industrial space around Heathrow is likely to take off now. Business parks like Stockley Park, Chiswick Park and Bedfont Lakes Country Park could be big beneficiaries. Along the M4 corridor, the effect is likely to be positive.

So, what about residential property?

The local economy, jobs and business are among the property fundamentals that investors want to see when they weigh up property investment opportunities. So, with the new Heathrow runway providing such a boost to local business (and the UK economy), you might assume that property investment in and around Heathrow is a no-brainer. Unfortunately, there’s an exception that proves every rule.

Residential investment property near to Heathrow may not be a wise investment right now. Residents are mightily upset by the plans to approve Heathrow. Some market practitioners, like estate agent eMoov, are predicting that prices in and around Heathrow could fall by 20%. This price fall could extend through to the centre of London – affecting a swath of property under the flight path and stretching from Richmond to Westminster.

eMoov predicts that the average house price in Hounslow and Hillingdon could fall from around £407,000 today to £330,000, costing homeowners and property investors almost £80,000. The estate agent’s founder and CEO Russell Quirk reckons that the expansion is “Not such great news for the hundreds of residents that will see their properties demolished as a result of the expansion of a third runway.”

How low could property prices go under the flight path?

The problem for those considering property investment to take advantage of the new runway (and the extra business and economic demand it will create) is deciding exactly where to invest.

Additional construction jobs while the runway is being built, and airport jobs after, should boost the local economy. The knock-on effect to local businesses could be off the scale. There’s going to be extra demand for housing, both from homeowners and in the rental sector.

But – and here’s the thing that is sending shivers down the spines of property investors in the local area – not many people want to live underneath a flight path. The constant noise and air pollution is a turn-off, and that is what could do so much damage to property prices here. Once quiet streets could become noise-filled tunnels, where it’s almost impossible to sleep at night and a relaxing cup of tea becomes a thing of the past.

It is the reason that so many are calling local property prices down by 20%. However, when researching prices of property in London, you can see that there’s a discount of around 10% on the average price of houses under current Heathrow flight paths to the average price of properties nearby.

So, a fall of 20% might be overdoing the potential downside –  particularly since the government has promised £700 million of sound insulation for local residential property owners. That’s not to say prices won’t fall, but 20% could be an overshoot on the downside and properties here could present some real value.

So, where are the best property investment opportunities thanks to Heathrow?

We’ve been concentrating on average house prices, but there could be a sector of the residential market that moves in the opposite direction to the anticipated falls in property prices. As the runway gets underway, smaller properties are likely to be in demand. These workers will need short-term and temporary housing.

It’s not only these workers that could be looking for homes. Local economic expansion looks set to occur at the same time that Crossrail and the Night Tube starts to transform transport into London. Suddenly places like Hillingdon will become an affordable option for young professionals and could provide exceptional property investment opportunities for buy-to-let investors.

Another town for consideration could be Slough. It’s a town with lots of employers, a strong local economy, and will be just six minutes from Heathrow if the proposed new rail link to the airport is built. Crossrail is coming here within the next few years, too. The impact of the new runway at Heathrow could be huge for Slough. The average price of property in Slough is up by 13% over the last 12 months. Heathrow’s expansion could accelerate that rate of value inflation.

To benefit from Heathrow expansion, do your research

You’re going to hear a lot about the Heathrow effect in the next few months and years. Some will be talking the market up; others will be saying it’s about to collapse. The only way to invest with confidence is to put in the legwork and do the research.

We spotted the property investment potential of Slough more than a year ago, thanks to our unique Hotspots Algorithm. We research 108 data points across 324 UK areas and rank the property investment potential for you. We take all this information and package into an investment guide that you can search for by the town, area, or postcode.

Contact one of our team on +44 (0)207 923 6100 to find out more about what’s happening at Heathrow and how it’s going to affect property investment in and around London.

Live with passion

Brett Alegre-Wood

Brett Alegre-Wood
November 23, 2016

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