London's population is forecast to grow by almost a third by 2050, to 11.3 million, adding the equivalent of 2.5 times the population of Birmingham to a city already facing a major housing shortfall and with its infrastructure operating at capacity. 

Huge investment is needed to open up new parts of the city to accommodate this growth, but the value of new infrastructure will only be maximised if it is accompanied by investment in place, international real estate adviser Savills says in a new report published today, London Infrastructure: Connecting Opportunities.

Savills believes that London needs to build new homes at the rate of 50,000 a year to meet forecast housing need, over 80 per cent costing no more than £700 per square foot, with the bulk costing under £450 per square foot.  This requires new locations to be identified, made accessible and developed, requiring simultaneous investment in placemaking as well as infrastructure. 

London is facing a bill of at least £95 billion to deliver the infrastructure needed by 2050.  This includes two Crossrail lines, extensions to the Bakerloo line, DLR and Overground as well as some HS2 cost, road improvements.  Such investment will open up new, lower value parts of London, by reducing journey times and commuter capacity to the centre.

But, says Susan Emmett, Savills residential research director: "Building new transport routes and opening new stations must go hand in hand with place improvement for neighbourhoods to realise their full potential." 

The firm has analysed the Crossrail effect on residential values and found that values around the four stations to the west of central London - Hanwell, West Ealing, Ealing Broadway and Acton - have outperformed the  borough average by 23 per cent over the past five years because these are locations that already had a sense of place.  By contrast, values on the north east segment of the line values continue to lag behind the borough average, despite the promise of a new station and improved journey times (10 mins shorter) into London, because of a lack of associated development to date. 

Almost 61,000 new homes are planned along the Crossrail line.  The stations to the north east - Manor Park, Ilford, Seven Kings, Goodmayes, Chadwell Heath could see the greatest growth in value if appropriate development and placemaking is carried out.

Similarly, approval for the extension of the Overground to Barking Riverside, combined with planned place improvement including 11,000 homes, could boost house prices by 67 per cent, still leaving values at a discount to competitor locations.  Bolder planning, for example by building over and around the transport nodes themselves to increase density, could boost the value of infrastructure investment still further. 

"London needs a long term vision and deep pockets if it is to accommodate forecast population growth and retain its competitiveness as a world city," says Emmett. 

"As London Mayor, Boris Johnson has argued, the retention of property revenue streams - stamp duty, land tax and business rates - could really boost the UK capital's ability to deliver development to meet the needs of its growing population."

Please click here to view the Infrastructure research report.

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