East London 'gold' for Olympic investors

The average house price in London has broken through the £300,000 barrier, with no signs of property price growth letting up significantly in the near future. But for the savvy investor who wants to buy property in the capital, the question is clear: where in the capital will they see the best return on their investment?

Some have suggested the central London market is still offering significant potential for gains, particularly for buy-to-let investors hoping to cash in on ever-high demand as well as rising rents.

Others believe that no matter where in the capital you buy, you are likely to experience success. However, depending on when an investor is hoping to see maximum returns, the various possibilities in London could yield results that are more successful for some and less so for others.

With the Olympics heading for the capital in 2012, it has been suggested that east London will see a surge in investment potential as the area is developed and regenerated in anticipation of the global sporting event.

However, the buy-to-let investor hoping to see short to medium-term results might be better off steering clear of the Stratford area for the time being, one expert has suggested. According to the director of research at property firm Hometrack, Richard Donnell, investment in east London will experience the best growth in the long-term.

"It's all about what return you want really," he commented, adding that property buyers are likely to benefit from buying east London property if they are "happy to take a long-term view".

He explained that east London property has the potential to outperform house price growth in the rest of the capital. "If house prices rise in line with earning over the next ten years, parts of east London have got a reasonable chance of outperforming the long run average for London property prices," Mr Donnell commented.

The regeneration of east London will include the development of Stratford, which will see a new retail development and improved transport links as part of regeneration work in the Olympic Village. Some 9,000 new homes are also expected to be built in the area.

"The whole broad area around Stratford and the Olympic village will benefit from economic regeneration," commented Mr Donnell. However, he added that predicting the movement of house prices in the area is "another issue", as the Olympic site is "quite disconnected" from adjacent housing markets. "Investments will have a beneficial impact on the housing market but there is only so high house prices can go," he added.

Halifax Estate Agents reported earlier this year that by February, house prices in the three postal districts closest to the Olympic village had experienced 15 per cent house price growth since the announcement of the capital's winning bid.

And its report predicted more growth for east London, saying that historically, host cities have seen house prices increase at a rate higher than the national average in the five years running up to the event.

The last four host cities – Barcelona, Atlanta, Sydney and Athens – averaged 66 per cent of annual house price growth in the five-year period preceding the Games.

And with five years to go until London 2012, property investors with a long-term outlook could be getting gold by heading east.