DEVELOPMENT ANALYSIS

IMPROVING TRANSPORT INFRASTRUCTUREMARKET OVERVIEW

VAUXHALL REPORT 2015

RESIDENTIAL RESEARCH

2

FIGURE 2

Walk times from Vauxhall station

< 5 minutes5-10 minutes10-15 minutes15-20 minutes20-25 minutes

Walk time fomVauxhall station

BELGRAVIA

Knightsbridge

Victoria

Sloane Square

Hyde ParkCorner

St. James’sPark

Westminster

Pimlico

Vauxhall

Oval

Stockwell

Clapham North

Kennington

Elephant& Castle

LambethNorth

Waterloo

SOUTHBANK

MAYFAIR

HYDEPARK

GREENPARK ST. JAMES’S

PARK

NINE ELMSBATTERSEA

PARK

CharingCross

RIVER THAMES

Source: Knight Frank Residential Research

In the years following the financial crisis, strong price growth in central London has partly been driven by buyers looking for a safe haven against the backdrop of global and political instability. The market is also underpinned by an undersupply of housing in the capital.

This strong price growth in core prime central London markets such as Kensington and Knightsbridge, has led, in recent years, to buyers increasingly seeking opportunities in areas close to prime central locations.

Buyers are also increasingly focusing on investment fundamentals such as location, infrastructure and regeneration potential.

Vauxhall is the key infrastructure hub adjacent to Nine Elms, central London’s biggest regeneration scheme that includes the iconic Battersea Power Station development. Given Vauxhall’s position – a short walk across the Thames from the Houses of Parliament and Victoria (figure 2), it occupies a privileged position as the gateway between this transforming Nine Elms district and central London.

Average residential prices in Vauxhall have risen by 69% since the beginning of 2010, as figure 1 shows. This exceeds the 45% growth seen in prime central London and

Vauxhall underground station is currently undergoing a £36 million revamp, part of a wider transport upgrade in the area.

The changes happening in the public realm around Vauxhall are being reflected in development, with renowned architects working on iconic buildings which are set to enhance the environment in this central London location. Some of the key development schemes in and around Vauxhall are shown in figure 3.

Vauxhall is also well positioned to benefit from the wider regeneration happening in the VNEB Opportunity Area. But the local market fundamentals are also strong, not least because of Vauxhall’s connectivity

OVERVIEW

the 20% growth in average house prices across the UK over the same period. Prices in the wider borough of Lambeth have also outperformed.

A wide transformationVauxhall is set to be dramatically remodelled in the coming years to re-establish a pedestrian-friendly town centre. There are plans to redesign the one-way traffic gyratory, creating a notable increase in public spaces. There will be room for more cafés and restaurants as well as retail outlets. The whole area will be opened up for pedestrians through to Albert Embankment.

Vauxhall is the best-connected area of the Vauxhall, Nine Elms and Battersea (VNEB) Opportunity Area, a 195-hectare riverside district that is one of the largest regeneration zones in central London.

90

100

110

120

130

140

150

160

170

180

VAUXHALLPRIME CENTRAL LONDON

20112010 2012 2013 2014

FIGURE 1

Price performance in Vauxhall vs prime central London Average prices, indexed 100=January 2010

Source: Knight Frank Residential Research/ Macrobond

Please refer to the disclaimer at the end of this report

3

FIGURE 3 Key developments of 100+ units with planning permission granted or currently under construction

SpringGardens

VauxhallPark

AmericanEmbassy

Vauxhall

Nine Elms

Pimlico

Nine Elms

Victoria

Vauxhall

BATTERSEA PARK

No. of units

Construction status

Not started

Under construction

Northern Line extensiondue to open 2020

< 250

251 - 500

501 - 1,000

>1,001

6

15

12

12

13

149

11

15

RIVER THAMES

7

86

10

5

1

3 4

2

Source: Knight Frank Residential Research

RESIDENTIAL RESEARCHVAUXHALL 2015

to the rest of the capital, which we examine in detail later.

The VNEB Opportunity Area is one of several large-scale regeneration areas in central London. Its prime riverside location, transport potential and ambitious scale and vision helps distinguish it from other schemes.

Spanning the London boroughs of Wandsworth and Lambeth, this includes more than 20 inter-connected developments that stretch from Lambeth Bridge in the east to Chelsea Bridge in the west.

As a whole, the VNEB Opportunity Area is forecast to provide 25,000 new jobs and 18,000 new homes for 30,000 new residents, playing its part in an attempt by local authorities to address the shortage of housing supply in the capital.

The area will also benefit from new public realm works and the transformation of brownfield sites into parks and gardens, including the Linear Park, a continuous stretch of green that will run from Battersea to Vauxhall. There will be high-quality retail and leisure sites as areas like New Covent Garden Market and Battersea Power Station are re-developed, as well as other cultural attractions, community facilities

and more than half a million square metres

of new business space, as a new London

residential neighbourhood is created.

The area also has the potential to

develop into a new diplomatic quarter,

with the opening of the new United

States Embassy in 2017 followed by the

Dutch Embassy. There are thought to be

FIGURE 4

How far tenants in London want to live from the nearest transport link

Source: Knight Frank Tenant Survey 2014

WITHIN 250 METRES

BETWEEN 250-500 METRES

BETWEEN 500-750 METRES

BETWEEN 750 METRES-1 KM

1 KM+

16%

24%

22%

29%

5%

WITHIN 250 METRES

WITHIN 500 METRES

WITHIN 750 METRES

WITHIN 1 KM

2-5 KM

MORE THAN 5 KM

14%

20%

17%

27%

11%

1%

WIT

HIN 250 METR

ESBET

WEE

N 250-500 METRES

BE

TWEEN 500-750 METRES

BETWEEN 750 METRES-1KM

1 KM+

4% Don’t know/No preference

WIT

HIN 250 METR

ES

WIT

HIN 500 METRES

WITHIN 750 METRES

WITHIN 1KM

2-5 KMMORE THAN 5 KM

9% Don’t know/No preference

Development Developer Status

1 22-29 Albert Embankment St. James

2 The Corniche St. James

3 Vauxhall Sky Gardens Frasers Property UK Ltd.

4 Grand South Landstart / Vincent Goldstein

5 Vauxhall Cross Wendover Investments Ltd.

6 Aykon DAMAC Properties

7 Keybridge House A2Dominion / Mount Anvil

8 Vauxhall Square CLS Holdings PLC

9 The Residence Bellway Homes

10 One Nine Elms Dalian Wanda Group

11 Nine Elms Point BDWZest Developments LLP

12 Riverlight St. James

13 Nine Elms Parkside Royal Mail Group PLC

14 Embassy Gardens Ballymore Group

15 The Garden (New Covent Garden Market)

VSM Estates Limited

Not started Under construction

Please refer to the disclaimer at the end of this report

91% OF LONDON TENANTS WANT TO LIVE WITHIN A 12-MINUTE WALK OF THE NEAREST TRANSPORT LINK

three or four other diplomatic missions mulling a move to the area, including the Chinese Embassy.

Well connectedAs shown in figure 2, it is possible to reach many key areas in central London within 25 minutes or less. In addition, Transport for London’s PTAL scoring

Disclaimer

© Knight Frank LLP 2015 – This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London, W1U 8AN, where you may look at a list of members’ names.

For the latest news, views and analysison the world of prime property, visit

KnightFrankblog.com/global-briefing

GLOBAL BRIEFING

RESIDENTIAL RESEARCH

Gráinne Gilmore Head of UK Residential Research +44 20 7861 5102 grainne.gilmore@knightfrank.com

RESIDENTIAL DEVELOPMENT

Mark Wilkinson Partner, Residential Development +44 20 7861 5414 mark.wilkinson@knightfrank.com

Alex Carr Partner, Residential Development +44 20 7861 5444 alex.carr@knightfrank.com

Knight Frank Residential Research provides strategic advice, consultancy services and forecasting to a wide range of clients worldwide including developers, investors, funding organisations, corporate institutions and the public sector. All our clients recognise the need for expert independent advice customised to their specific needs.

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

Knight Frank Research Reports are available at KnightFrank.com/Research

FUTURE TRENDS

GROWTH AS A COMMERCIAL DISTRICT

ESTABLISHED PRIME RESIDENTIAL MARKET

RESIDENTIAL RESEARCH

CITY CENTRALEXAMINING LONDON’S NEW PRIME RESIDENTIAL DISTRICTS FROM FARRINGDON TO WHITECHAPEL 2015

London: City Central - 2015

London Development Hotspots 2015

Crossrail - 2015

LONDON HOTSPOTSRESIDENTIAL DEVELOPMENT OPPORTUNITY AREAS 2015

RESIDENTIAL RESEARCH

HOUSING DELIVERY ACROSS LONDON

IMPROVING TRANSPORT INFRASTRUCTURE MARKET FORECASTS

UK Housing Market Forecast - May 2015

RESIDENTIAL RESEARCH

UK RESIDENTIAL MARKET FORECAST

“ Don’t assume the election result means political risks have disappeared for the prime London market.”

Follow Liam at @LiamBaileyResi

For the latest news, views and analysis on the world of prime property, visit Global Briefing or @kfglobalbrief

LIAM BAILEY Global Head of Research

HOUSING FORECAST OVERVIEWThe Conservative Party’s recent surprise election victory has led to a spate of frothy house-price forecasts. The reality is likely to be more sober, argues Liam Bailey

Headlines May 2015Our immediate post-election forecast review has left our existing five-year forecast largely unchanged, our risk monitor however has undergone a substantial overhaul

Cumulative growth in UK prices will total a little over 18% in the five years to the end of 2019

While political risk for the prime London market has fallen, affordability constraints and rising stock volumes will limit price growth in the near term

UK rents and prime central London rents will rise 2.2% and 3.5% respectively in 2015

Interest rate rises and the risk of a renewed global economic slowdown remain the biggest risks to the UK housing market

Knight Frank Residential Market Forecast May 2015

2014 2015 2016 2017 2018 2019 2015-2019

Mainstream residential sales markets

UK 7.2% 3.5% 2.5% 3.0% 4.0% 4.0% 18.2%

London 17.8% 3.5% 4.0% 5.0% 5.5% 5.5% 25.8%

South East 10.6% 5.0% 3.0% 3.5% 5.0% 5.0% 23.4%

South West 8.0% 4.0% 2.5% 3.0% 4.5% 4.0% 19.3%

East Anglia 9.8% 4.5% 3.0% 3.5% 4.5% 5.0% 22.2%

East Midlands 6.0% 3.5% 2.0% 2.5% 4.0% 4.0% 17.0%

West Midlands 6.8% 3.5% 2.0% 2.5% 4.0% 4.0% 17.0%

North East 4.4% 3.0% 2.0% 2.0% 3.0% 3.5% 14.2%

North West 3.8% 3.0% 1.5% 2.0% 3.5% 3.5% 14.2%

Yorkshire & Humber 1.5% 3.0% 2.0% 2.0% 3.5% 3.5% 14.8%

Wales 1.4% 3.0% 2.0% 2.5% 4.0% 4.0% 16.5%

Scotland 4.2% 3.5% 2.5% 3.0% 4.0% 4.0% 18.2%

Prime residential sales markets

Prime Central London 6.7% 1.0% 4.5% 5.0% 5.0% 6.0% 23.3%

Prime Outer London 10.5% 3.0% 5.5% 5.0% 5.0% 5.0% 25.8%

Residential rental markets

UK Mainstream 2.0% 2.2% 2.3% 2.3% 2.4% 2.4% 12.1%

Prime Central London 4.0% 3.5% 3.3% 3.3% 3.0% 3.0% 17.1%

Prime Outer London 0.5% 4.0% 3.3% 3.0% 2.8% 2.8% 16.8%

Source: Knight Frank Residential Research

We last reviewed our UK house-price forecast in February. At that point, despite a slowing economy, we left our outlook for modest future growth unchanged. Since then forward-looking economic indicators, such as our own House Price Sentiment Index, have begun to tick upwards.

A majority win for the Conservative Party at the General Election on 7 May, means fears of weak government for the next five years have, in the short-term at least, disappeared. In light of this, and allied to improvements in economic and consumer sentiment, we have revisited our forecast for UK house-price growth.

However, with the exception of moving the prediction for our Prime Central London Index from 0% to +1% in 2015 (there appears sufficient momentum in central London to deliver modest positive growth this year), we have held firm on our view for other markets for the moment. We will be reviewing our figures again in June, following the Queen’s

Speech, and with the benefit of a month’s post-election market activity.

The risk from higher interest rates, and therefore potential future affordability pressures, global economic risks and the uncertainty surrounding the outcome of the promised UK referendum on EU membership by 2017, collectively mean we don’t foresee an immediate upswing in UK price growth above our existing forecast.

Although our view on prime London prices has turned positive, we are monitoring the volume of new housing supply, especially new-build, which has the potential to weigh on price growth.

In terms of key risks, while we have downgraded the impact of political risk, we remain mindful that the previous Conservative-led administration was arguably the most activist in recent history regarding high-value property taxation. But interest rate and global economic uncertainty in our view remain the key risks for house prices.

The Tenant Survey - London Focus

London has seen the biggest growth in the private rented sector out of any region in the UK over the last decade. The expansion of rented accommodation as a form of tenure has been driven not only by the dynamics of affordability in the London housing market, but also a preference for more flexible living arrangements.

We have drilled down into the results of our country-wide tenant survey, the largest survey of this type ever conducted, to focus on the private rental trends in London, to help inform and shape thinking on how the sector may develop.

The first key finding is that Londoners, while just as concerned with the affordability of rental accommodation as those in the rest of Great Britain, place much greater emphasis on proximity to transport links, as shown in figure 1 below. Nearly four-fifths (79%) of respondents based in London said that being close to transport links was important to them when choosing privately rented property. This fits with the increased dependence on public transport in the Capital, and is also supported by the uplift in capital values seen around transport links in the sales market, for example, Crossrail stations. Younger

renters are the most likely to factor the distance of a rented property from transport links into their decisions, with 58% of 18-24 year olds across Great Britain saying it was a key factor in choosing a privately rented property. Overall, nearly two-thirds (63%) of London tenants surveyed want to be within a 9-minute walk of a transport link such as the bus stop, tube or train station, compared to 51% of tenants surveyed across Britain.

In terms of location vs affordability, a significantly higher proportion of Londoners, especially younger tenants, are prepared to live in smaller types of accommodation to ensure they are in a good location at an affordable price. As shown in figure 2, more than half (54%) of 18 to 24 year olds said they would be happy to live in a studio flat (with communal entertaining space) if doing so made the rent more affordable in a central area. Some 39% of 25-34 year olds and 42% of 35-44 year olds in London would also be prepared to choose a studio in a central location for an affordable rent. When asked if they would live in a “micro-flat”, a small studio flat around 300 sq ft in size, in a building with communal entertaining space which was in a “perfect” location, 45% of 18-24 year olds in London indicated that they would consider such an option, while 32% of 25-34 year olds and 37% of 35-44 year olds also agreed. This is much higher than the overall GB average of 27%.

When it comes to the maximum Londoners are prepared to pay in rent, the figure is slightly higher than the country-wide average. The mean average of our survey responses for those in the Capital shows that the maximum respondents were prepared to pay was 42% of their gross monthly personal income, compared to 40% across Britain.

TENANT SURVEY: LONDON FOCUS

RESIDENTIAL RESEARCH

GB

LONDON

Closeto goodschools

Close toamenities

(cafes, gym etc)

Close tofriends and

family

Close toshops

Close totransport

links

Close towork/

university

Affordability

Closeto goodschools

Close toamenities

(cafes, gym etc)

Close tofriends and

family

Close toshops

Close totransport

links

Close towork/place

of study

Affordability

51% 55% 33% 39% 12%7%

58%55%79%53%85%85% 34% 29%

FIGURE 1 Which of these are important to you when choosing a rental property? % of respondents who identified each factor

Source: Knight Frank Tenant Survey 2014

FIGURE 3

% of respondents prepared to pay more than 40% of gross income on rent:

Source: Knight Frank Tenant Survey 2014

LONDON 33%

GB 25%

FIGURE 2

Space vs Location % of respondents who would consider living in a studio flat making central locations more affordable

Source: Knight Frank Tenant Survey 2014

0

10

20

30

40

50

60

0% 10% 20% 30% 40% 50% 60%

UK

75+

65-74

55-64

45-54

35-44

25-34

18-24

ALL

25-34 (UK)

LONDON ALL

LON

DO

N

FIG2

FIG5

UK

0% 10% 20% 30% 40% 50% 60%

45+

35-44

25-34

18-24

0% 10% 20% 30% 40% 50% 60%

LON

DO

N (B

Y A

GE)

GB

LON

DO

N (B

Y A

GE)

GB

Average

Average

45+

35-44

25-34

18-24

Don’tknow

60%+50%40%25-34

18-24

POST-ELECTION ANALYSIS PRICE PERFORMANCE MAP OF LONDON

THE RESURGENT RENTAL MARKET

LONDON RESIDENTIAL REVIEWTHE GENERAL ELECTION AND THE PRIME LONDON MARKET SPRING 2015

RESIDENTIAL RESEARCH

London Residential Review - Spring 2015

UK Residential Market Update July 2015

UK housing and economic overviewHouse prices continued to ease in June according to figures from Nationwide Building Society, with average prices slipping by 0.2% during the month. This took annual growth to 3.3%, with 7.3% growth in London. The picture on prices is not entirely clear however. Halifax’s monthly house price data showed a 1.7% rise in prices in June.

Additionally, the house price sentiment index, produced by Knight Frank and Markit Economics, a forward indicator for house price movements, ticked up slightly in June after falling in May.

RESIDENTIAL RESEARCH

UK RESIDENTIAL MARKET UPDATE

“ The government has ramped up pressure on local authorities around planning, emphasising that increasing the supply of new homes is high on its “to do” list.”Follow Gráinne at @ggilmorekf

For the latest news, views and analysis on the world of prime property, visit Global Briefing or @kfglobalbrief

GRÁINNE GILMORE Head of UK Residential Research

POST-BUDGET MARKET UPDATE The Chancellor focussed on buy-to-let landlords, non-doms and the planning regime in his summer Budget. Meanwhile, residential price growth continued to ease across the UK, as rental growth strengthened. Gráinne Gilmore examines the latest data.

Annual change in house prices, UK Annual change in house prices, UK

Source: Knight Frank Residential Research / Macrobond

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2013

2010

2007

2004

2001

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

1962

1959

1956

1953

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

201520142013201220112010

Land RegistryNationwideONSHalifax

Key facts July 2015UK house prices fell by 0.2% in June, taking annual growth to 3.3%, down from 4.6% in May

Prices in prime central London rose by 0.5% in June, as annual growth eased to 2%

Prime country house prices are up 2.3% year-on-year

House price sentiment index, bellwether for market, ticked up in June

move could also drive up rents if costs are passed on, but competition in the market will likely curb such increases.

The Chancellor also changed the rules surrounding non-domiciled residents in the UK, cutting the timeframe for those claiming non-dom status to 15 years and scrapping the inheritance of non-dom status. There was also a change to rules for those holding property in an offshore company, meaning that they will be liable for inheritance tax.

Additionally, the chancellor announced plans to increase the tax free allowance for inheritance tax for couples who pass on their home to their children. The increase will be tapered from 2017 eventually rising to £1m in 2020-21. An allowance will be put in place to protect downsizers.

House price sentiment rises House Price Sentiment Index, June 2015, UK

Source: Knight Frank Residential Research / Markit Economics

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2013

2010

2007

2004

2001

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

1962

1959

1956

1953

30

35

40

45

50

55

60

65

70

75

80

May-15May-14May-13May-12May-11May-10

Pricesrising

Pricesfalling

Nochange

GeneralElection

30

35

40

45

50

55

60

65

70

Jun-15Jun-14Jun-13Jun-12Jun-11Jun-10

Pricesrising

Pricesfalling

Nochange

While the market is underpinned by record low interest rates, there are still issues around accessing mortgage finance and affordability which are having an impact.

For owner-occupiers, the summer Budget did not include major reforms to property taxes, however buy-to-let landlords who pay higher rate tax will see the mortgage interest relief they can claim cut from 2017, falling to 20% by 2020. The move came just days after the Bank of England flagged concerns that rising interest rates could pose a challenge to some landlords in its Financial Stability Review.

The new rules could see landlords reviewing the offers they make on new property as they will have to factor in the new tax environment. There has been some speculation that the

Prime London price growth eases Annual change in values in prime central and prime outer London

Source: Knight Frank Residential Research

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

2013

2010

2007

2004

2001

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

1962

1959

1956

1953

0%

1%

2%

3%

4%

5%

6%

7%

JunMayAprMarFebJan

POL

2015

PCL

Compared to one month ago, what do you think has happened to the value of your home?

MEASURING SUPPLY OUTLOOKHOW HAVE PRICES PERFORMED?

CROSSRAILANALYSING PROPERTY MARKET PERFORMANCE FROM READING TO SHENFIELD 2015

RESIDENTIAL RESEARCH

The Wealth Report 2015

system, which measures the distance to the nearest public transport stop and service frequency, gives Vauxhall the highest possible score.

This is the result of having the second busiest bus station in London, a tube station two stops from London Victoria and a frequent overground train service into London Waterloo. It also shows that using just the tube network in rush-hour, the whole of the West End and the City are accessible within 30 minutes, with Victoria a 3-minute tube ride and Oxford Circus a 7-minute journey.

The importance of locations which are close to transport hubs was underlined in Knight Frank’s recent Tenant Survey, the largest survey of private rented sector tenants ever conducted across the UK. This showed that while more than half of tenants across the country said that proximity to transport was a priority when choosing a rental property, more than 80% of those living in the capital said that this was a key factor. Figure 4 shows how far tenants in London would ideally like to live from their nearest transport hub.

Transport is also a key part of the VNEB Opportunity Area. There will be a £1 billion injection into infrastructure. This will encompass two new stations on the Northern Line, Nine Elms on Wandsworth

Road, and Battersea Power Station. These stations could open as early as 2019 and provide a direct link to the West End and the City in 15 minutes or less.

The infrastructure plan also includes two riverbus piers on the Thames, new bus routes and an extension of the city’s cycle hire scheme. There are also plans for a new pedestrian and cycle bridge across the Thames, connecting Nine Elms directly to Pimlico on the north bank.

The extension of the Northern Line will not only enhance the connectivity of the area but will also underline Vauxhall’s position as a central transport hub, providing quick access to the West End and the City.

Outlook Vauxhall is primed to benefit from the large-scale regeneration, infrastructure investment and place-making currently underway. As conditions in the wider London market start to normalise, these are the key factors that will underpin performance. What could also set Vauxhall apart is its location. Sitting just on the cusp of the current boundaries of prime central London, this area, which is undergoing a notable transformation, may see increased buyer interest from those seeking value in a central and well-connected part of the capital.