Cheap and unfashionable east and southeast London suburbs such as the Royal Docks and Woolwich Arsenal are likely to experience a boom in house prices with last week’s news that the government has given the go-ahead to the capital’s long-awaited east-west rail link.

Construction of the £10 billion Crossrail project — with lines linking Romford and Dartford east of London to Reading in the west, as well as a north-south link from Hackney to Clapham — is due to start next year.

“The biggest rises will occur in east London, especially Stratford, Royal Docks, Woolwich Arsenal and Romford,” says Nigel Evans, of London Residential Research, a property consultancy that advises Ken Livingstone, London’s mayor.

“At the moment property prices in these areas are cheaper than almost any other part of the capital,” he adds, but they currently suffer from poor transport links. Crossrail will give them a fast service across town.

The prices of similar houses on different parts of the Crossrail route differs enormously. A four-bedroom semi-detached in Romford can be yours for £230,000, whereas in Ealing you would pay more than £350,000. In Stratford, the part of east London already best served for public transport, a two-bedroom flat costs about £175,000, but in Hammersmith a similar property would cost £280,000.

Crossrail’s second line will run from Hackney, the only borough in inner London without a Tube station, where a four-bedroom house can currently be bought for about £250,000. It will extend through to Clapham, where a similar property would cost at least twice as much.

Stations are planned to open from 2008 — even though there appears little chance that the entire project will be ready should London be chosen to host the 2012 Olympics.

Some canny buyers anticipated last week’s announcement and invested early. Laith Al-Janabi, an IT consultant, bought a new three-bed house at Woolwich Arsenal for £250,000 last autumn.

“Crossrail was a factor in why we moved to Woolwich a year ago. We knew the area didn’t have great transport, but that it was tipped for a fast link,” says Al-Janabi.

Local estate agents say the Crossrail announcement may immediately add 5% to property prices around Woolwich, even with some years to go before completion.

“That’s good news for us, but the longer-term benefit will be the regeneration of the area,” says Al-Janabi. “The local shopping centre is appalling and there’s not much here except housing. Woolwich needs the sort of improvements that the Docklands Light Railway (DLR) helped bring to places such as Crossharbour and South Quay in the 1990s.”

Woolwich will be one of a host of outer London areas — some in the west but most in the east — that will get their first fast link to the City and the West End. Journey times to the centre from most parts of east London are expected to be less than 15 minutes.

The two Crossrail lines will stretch beneath the centre of the capital, meeting at a large interchange under Tottenham Court Road and creating enlarged stations at Victoria and King’s Cross. The lines will then extend to southeast London and west through Ealing, on to Reading and possibly with a spur track to Heathrow airport.

“We’ll see a redrawing of the one-hour commuting boundary,” says Richard Donnell, head of research at property consultant FPDSavills. “For many commuters, 60 minutes is the maximum they’ll tolerate travelling each way. If Crossrail speeds up train times as much as it promises, we could see areas such as north Kent becoming accessible for central London commuting, or places out in Berkshire, close to Reading. Property prices will increase in some unlikely places.”

Donnell says sophisticated investors could use areas such as east London as a long-term pension plan, with high capital rises paying dividends up to 20 years from now. But people wanting maximum profits should be willing to keep an east London property for at least 10 years.

“The faster services won’t be seen until 2012,” says Donnell. “Some buyers may rush to purchase now and cause a short-term hike in prices, but then the market may even dip a little if properties are located close to building work on stations, or near roads that may be dug up for years.”

However, he predicts “another surge of demand when the project is nearly finished and everyone can see the benefit. At that point prices will really push up”.

Crossrail is only the latest shot in the arm for east London. The Financial Services Authority and the London Assembly have identified Thames Gateway, east of Stratford, as a regeneration hub where corporate relocations and office developments should be encouraged.

Two years ago the Jubilee line Tube extension — which is already stretched to capacity — brought Stratford within commuting distance of central London. James Hyman of estate agent Cluttons at Wapping, says: “Stratford is the big winner out of Crossrail, too. It’s now going to have an interchange with almost all of London’s transport systems, and it’s superbly placed for the City.”

Some agents believe Crossrail may cause the high prices in areas adjoining the City, such as around Tower Bridge in east London, to fall.

There may also be a surge in the number of new homes built in east London, where substantial brownfield sites are ripe for development.

“It’s not just Crossrail. The extension of the DLR and other regeneration projects gives everyone confidence in east London. The builders will move in,” says John Anderson of Berkeley Homes, one of the few developers already building homes along the Crossrail route.

“But we need schools and shops to go with new communities of houses. They exist at the western end of Crossrail, but not in the east. They’ll take some years to be built but the area is on the move and prices will go up.”

www.crossrail.co.uk

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