How Transport Links Can Transform Demand In Major Cities

Transport links are one of the biggest drivers of tenant demand in the property market. In research by GoCompare, 16.88% of tenants prioritise the distance from work when choosing a property. Similarly, the Knight Frank UK Tenant Survey 2019 shows that transport links are the second most important consideration for tenants, only losing out to affordability.

With this in mind, when judging the potential of a locale, transport links and accessibility become vital signposts for investors. Inward investments often directly impacts infrastructure, improving things like travel links and public transport. This can have a major effect on demand and surrounding property prices, both vital for any investment.

Consider the Crossrail project within the London Commuter Belt. Designated as the Elizabeth Line, Crossrail will stop at 41 accessible stations, 10 new and 30 upgraded, serving around 200 million people a year and vastly improving connectivity around the Commuter Belt with improved state-of-the-art trains.

So, how has Crossrail affected Commuter Belt investment? Most Commuter Towns rely on connectivity to survive and as one of the major infrastructural projects currently underway in the UK, Crossrail is already impacting property prices and tenant demand. Since 2009, properties within a mile of a proposed station have risen in value by 66%.

This isn’t an isolated case. Mumbai in India has recently started developing the Mumbai Metro, a key infrastructure project that is improving transport channels around the city. Set to be operational in five to ten years, the Mumbai Metro will connect key areas in the eastern and western parts of the city, transporting huge numbers of commuters each day. It’s expected that by 2023, the metro will be carrying as many passengers as the current train system, estimated at nearly 1,500 passengers per train. 

Much like Crossrail, the Mumbai Metro is already having a major impact on surrounding property. From commercial properties near Metro hubs to residential property in Ghatkopar and Andheri (two key destinations that will be connected within the city), rates have soared with news that long-standing infrastructure challenges are being assessed. Rajat Khandelwal, Chief Marketing Officer, believes: 

“The metro will uplift those areas, which are far from the suburban railway stations. It will also have a significant impact on the lesser-known areas covered along its routes. One can expect approximately 10 – 50 per cent appreciation in the short-term. The areas under the metro route that is already operational have already witnessed an appreciation of 10 – 20 per cent.”

While the socio-economic impact that projects such as Crossrail and Mumbai Metro have on a major city or town is huge, the level of growth mentioned by Khandelwal clearly demonstrates the impact on real estate is just as pronounced. The uplift typically occurs in several stages – an initial jump in prices when a project is announced, closely followed by another increase as the project nears completion. In many cases, the influx of people that want to live near the line can ‘overflow‘ to nearby locations, boosting prices in a ripple effect. When this impact is centered around a commercial centre – much like the Mumbai Metro – the effect can be even more profound. 

In other cases, groundbreaking transport links can open up a city to a completely new audience. While Crossrail and Mumbai Metro will make travel much easier around their respective local regions, High Speed 2 in the UK is opening up Birmingham to a whole new demographic. One of the biggest infrastructure projects the UK has ever seen, High Speed 2 (HS2) is designed to connect London and Birmingham with a faster, high-capacity train line, reducing the overall journey time to just 49 minutes.

Unsurprisingly, this is having a huge effect on the Birmingham property market. With the average Birmingham house prices up by 16% since 2016 and only set to rise further, buyers are jumping at the opportunity to purchase in a location which is seen as up-and-coming, connected and affordable.

At the same time, we’re seeing tenant demand from renters that are looking to leave the capital, where the property market is much more competitive and thus, expensive. As young professionals and families look for better rental opportunities, demand is hitting new highs as a new market starts considering Birmingham. It’s possible that, if HS2 goes ahead, Birmingham will effectively become a commuter town for London overnight.

It’s clear that having the right amenities nearby is vital. Investors need to consider that having transport links in the area can help boost property prices and demand to new levels, especially in emerging markets experiencing other redevelopment. 

Take Slough, a town just outside of London, for example. Slough is an established ‘commuter town’ as it has direct links to London but is a more affordable market – providing London workers who want to pay less for property a base whilst still being able to commute into the capital. With 46% of the homes in Slough let to people that have left London, this isn’t an uncommon trend. Also consider that it’s quicker to travel from Slough to a major London station than it is to travel from one side of London to the other. It makes sense that people would want to live in a town with direct links to work but more affordability in all aspects of day-to-day life – from property prices to living costs.

This is why investing near London can be so lucrative. Commuter Belt locations such as Slough, Reading, Bracknell and Basingstoke all have easy access to London, affordable property markets and are experiencing growth with new developments. This amount of potential demand is huge for investors and can result in consistent, quality professional tenants as well as natural market growth.