When the greatest show on earth comes to the East End next year, the regeneration of the area will bring with it the hottest property around, leaving investors basking in their own glory.

Who can forget the euphoria experienced by the whole of Britain in 2005 when it was announced London would host the 2012 Olympic Games? The capital won a two-way fight with favourites Paris and although it was a momentous day for everyone in British sport, the East End’s property nvestors were equally delighted at the prospect of boosting the economy.

The extortionate amount of cash being generated into redeveloping the areas in and around the Olympic Village in Stratford, will leave a legacy beyond the summer of 2012. In fact long after that, too, as London has also secured the second biggest event behind the Games – the 2017 World Athletics Championships. Pipping Doha to the post in mid-November means it won’t just be the Olympic Stadium which is the focus once again, but the area, too.

So have property prices in the East End rocketed since that major decision in Singapore six years ago? Surely the ongoing regeneration of this once run-down area means investors, homeowners and developers alike will take advantage and no doubt reap the rewards come next year, but is it all plain sailing?

A cash injection
Although a stone’s throw away from the City of London, the East End has, in many ways, been a million miles away. Gangsters like the Kray Twins are what spring to most people’s minds when thinking about this corner of the world, rather than a place where fortunes are made.

While property prices in central London seem to defy recessions and economic gloom, house prices in the East End have always struggled to keep pace. But since 2005, it has been desired that this area will finally be elevated to a level where it deserves to be. And in terms of regeneration, the East End of London – Stratford in particular – has certainly benefited from the upcoming Games. Industrial land around the River Lea that may never have been developed has been turned into an international sporting arena and neighbouring areas have been gifted with new residential developments, shops and transport links.

The CBRE (CB Richard Ellis, a commercial property and real-estate services adviser) is convinced about the positive impact of the Games. It states in a report: ‘The Olympics will provide a boost to Stratford as well as other parts of London, but their greatest legacy will be the land that was assembled to host the Games – the landscape of East London has changed totally.’

Development in the East End has continued during the worst recession since the 1930s in order to hit the 2012 deadline, while similar developments across the country have ground to a halt. The newly opened shopping centre, Westfield Stratford City, is an example of this. Westfield’s commitment in continuing the development despite a difficult economic climate gave other investors confidence to continue their projects. ‘East London has emerged from the recession in a much better state than the rest of Greater London,’ says CBRE.

Mixed messages
With all this, you would expect property prices to have been oblivious to the credit crunch and rocketed.

But that’s not quite the case. Average house prices in Stratford, the area pinpointed to scale new heights, have only gone up around 4% since 2005 – from approximately £215,000 to £225,000. However, other neighbouring areas, such as Hackney, have flourished. An average house here in 2005 would have cost around £265,000. Today, you will have to cough up in the region of £510,000. Conversely in Barking and Dagenham, prices have actually fallen since 2005. A house that would have set you back £227,000 can be snapped up now for around £212,000 – a drop of 5.5%.

The discrepancies in these figures suggest it’s not the Olympics working their magic in real estate. Other factors – such as accessibility to the City, and whether an area is seen as trendy and desirable by the cash-rich – are at play.

Dal Singh of local estate agency, HomeChoice, says: ‘Strict mortgage-lending criteria has meant that property owners have not been able to sell properties for as much as they may have hoped. So, even though they should have benefited already from the fact that the Olympics are coming to town, they haven’t.

‘However, those with properties in and around the Olympic Park are profiting from the rental market. Rents have shot up and will triple at the time of the Games.’

But Dal warns that this will only be for a short period of time. ‘Landlords have to decide now whether it is worth vacating their property in order to achieve higher rents for the six to 10 weeks during the period of the Games.’

Looking to the future
All this is well and good, but what will happen once the Games and Athletics Championships are over? Will investors take their eye off the East End, leaving it once again in the shadow of the City? Maybe not. Ikea, the flatpack furniture maker, has announced plans to build a 26-acre development called Strand East in Stratford through its property development arm, LandProp. Managing director of LandProp, Harald Muller, says: ‘We are hugely excited... We see Strand East as a place for families and that contributes to the regeneration of Stratford.’ The development, if granted planning permission, will consist of 1,200 new homes, 480,000 sq ft of offices and a 350-bedroom hotel.

‘Not only does it create a new high-quality, waterside destination which provides new homes, jobs and leisure facilities, it is a demonstration of investor confidence in the area’s future in a difficult market,’ says Olympic legacy minister Bob Neill.

So, while it may not be worth buying property just for short-term gains, it seems as though the improved infrastructure and facilities that the Olympics have gifted to the East End will ensure it has a glittering future.

‘I will be rich’
Rita Darbar, property investor from Harrow, Middlesex ‘I bought two apartments in newly developed buildings close to the site of the Olympic Village very soon after the Games were announced. ‘Although the prices have not gone up very much so far, talk to me this time next year when the Games are only months away and I believe it will be a very different story. ‘But even if prices stay subdued due to the current financial crisis, I think the area’s regeneration will have a big impact on values once the economy picks up. Stratford has excellent transport links now and, with the new Westfield shopping centre, young, trendy, well-off people will be drawn to the area making it desirable – and me, rich!’

Photograph: GETTY IMAGES