The investment case for Whitechapel

Summary

We believe that the investment case for residential property investment in Whitechapel is compelling.

Three specific factors underpin the investment case for the area and the specific property on our platform.

Firstly, the area, which is within walking distance of London’s financial heart, is undergoing a social transformation and looks likely to undergo some of the dramatic gentrification seen in nearby Shoreditch and Hoxton.

Secondly, a Crossrail station is due to open in Whitechapel in 2018. Crossrail is currently Europe’s largest infrastructure project and represents a major improvement for public transport in London. JLL expect Whitechapel to benefit most from Crossrail driven capital growth over the next 5 years.

Thirdly, our Whitechapel property has an estimated gross rental yield of 4.84%, which is a very favourable figure for central London.

 

These points are discussed further below, or you can go directly to our property page by clicking here.

Changing social dynamics and gentrification

Whitechapel’s demographic legacy is one of immigration and local authority housing. It has Victorian housing stock and is within walking distance of the City of London, which is London’s financial district.

Since its prices are lower than in neighbouring areas, it is seeing an influx of young professionals, notably those working in the City. Large-scale developments (e.g. ‘Cityscape’ and ‘Goodman’s Fields’) are bringing more than 1,000 new high-end homes into the area.

Whitechapel is next to Shoreditch & Hoxton, which have seen very stark gentrification and capital growth in the last decade. Given the considerably lower price-levels in Whitechapel and a similar demographic shift in favour of young professionals, we expect strong price-rises in Whitechapel too.

Whitechapel is very well-connected by public transport. It has multiple stations: Aldgate, Aldgate East and Tower Hill (all London Underground stations in ‘Zone 1’), Whitechapel (a London Underground and London Overground station), Shadwell and Tower Gateway (Docklands Light Railway stations) and Fenchurch Street (mainline station).

In addition, Whitechapel is due a station on the new Crossrail line…

 

Crossrail: Europe’s largest current infrastructure project

Crossrail is a new, high-speed railway line crossing London and also Europe’s largest infrastructure project.

Although already well-connected, Whitechapel will be one of 38 stops along the new Crossrail line that runs from Reading in the West to Essex in the East. Once the line is complete in 2019, the journey from Whitechapel to Canary Wharf will be reduced from 12 minutes to 3 minutes, and the trip to Heathrow Airport to 36 minutes. The line increases London’s train capacity by 10%.

A third-party forecast for capital growth in Crossrail station locations estimates that Whitechapel will benefit from higher capital growth than any other area, at 54% for the period 2014-2020. A topic covered by The Telegraph recently too, you can access the article here.

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You can also read more about Crossrail in a previous article we wrote.

 

An unusually high rental yield for Central London

Our investors have told us that they have a strong appetite to invest in London properties. Whilst we are keen to cater to that, we’re mindful that rental yields have compressed in recent years – and we favour investment opportunities with a net investment yield in excess of inflation and medium term interest-rate expectations, for greater investor protection should capital values experience volatility.

With the Bank of England’s inflation target at 2% and medium term interest rate expectations below this, our hurdle rate is a net income yield of at least 2% (excluding capital growth). This rules out much of central London. However, our Whitechapel property qualifies comfortably with a net dividend yield of 2.9% after fully accounting for purchase costs and fees.

 




 

Important Note
Property Partner does not provide advice and nothing in this article should be construed as investment or tax advice. The information which appears in this article is for general information purposes only and does not constitute specific advice. Neither does it constitute a solicitation, offer or recommendation to invest in, or dispose of, any investment that is mentioned in this article. If you are in any doubt as to the suitability of an investment, you should seek independent financial advice. The value of investments can go down as well as up. Past performance is not necessarily a guide to future performance. There are risks associated with an investment in any of the products featured on our website.