Why living near the Tube will cost an extra £27k

by ReenaSewraz on 23 April 2012  |  2 comments
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Properties near to London Underground stations enjoy an incredible mark up, in some cases of up to £27,000!

House hunters in London pay a massive premium for properties located near a Tube station, according to new research by Nationwide.

The study shows that people will typically have to pay a 9% premium (totalling £27,000 in some instances) for a property within 500m of their nearest station compared to a similar property 1,500m away. 

The biggest premiums

The report reveals that the three main offenders of disproportionate pricing are houses closest to the Circle Line, Bakerloo Line and London Overground stations.

Properties near the Circle Line are nearing £650,000 on average, while houses near the Bakerloo Line are going for just under £520,000. Those in Overground station areas demand around £430,000.

The premium you pay decreases as you move further away from the station. Houses at a 1,500m distance enjoy a significantly lower 1.9% charge above normal prices in the area.

An increasing premium

The figures released this week show an increase of 2% from the 7% premium reported back in 2010. So what has prompted the change?

Improvement work conducted on the transport network could be the source. The East London extension of the Overground has now been completed, offering a service between Highbury & Islington and Crystal Palace/West Croydon.

Boroughs like Hackney have seen an 11% rise in house prices because of the new stations the line has produced like Dalston Junction, Haggerston, Hoxton and Shoreditch.

London bubble

We all know that the location and having good transport links are the top priorities for house hunters in general, but in London buyers are willing to pay a significant premium that is not the case elsewhere in the country.

The south generally seems to be experiencing property value rises while the north has seen a drop, reigniting dabates about the north-south divide.

Perhaps compared to the rising cost of commuting into the capital, Tube fares and being unable to drive anywhere for fear of the congestion charge, many have given in to the hefty house prices as a compromise.

Alternatives

You may have to keep your distance from central London and stick to the suburbs if you want to beat the premium.

The report showed that average house prices are less expensive when the nearest station happens to be near the Metropolitan Line. This could be because the line stretches to the outer suburbs, with only a small section in central London.

One London borough that fared well in the report was Brent (located north of the river) which has more than 50% of properties within 500m of a station. This area encompasses places like Wembley, Brondesbury and Kilburn and benefits from access to a number of key lines, like the Metropolitan, Jubilee, Piccadilly and Bakerloo.

But of course if these areas don’t appeal - there’s always the bus! Why not look at the route of a direct bus and find property along it?

Would you pay a significant premium for the sake of better transport links? What else would you pay a premium for when buying a property?

More on house prices and property:

Rightmove: north-south divide in property asking prices continues

Housing market stalemate as young people can't buy

London parking space costs more than a house in the North

The rise of the rent-to-move landlord

The hidden cost of buying a new build