The Olympics boosts the real estate market.

The Olympic Games have a significant impact on the residential and commercial real estate market - in some cases, prices in the host cities skyrocket. Equally impressive is their decline after the Olympics. How will the London market behave?

BFM.ru

Olympic host cities have shown both a sharp rise in housing prices before the Games and a significant drop after their conclusion. The most illustrative example is Barcelona. Prior to the 1992 Olympics, real estate in the capital of Catalonia increased by 131%, and after the Games it decreased by 50%. There were record-breaking cities that built entire towns for the athletes. For example, more than 10,000 housing units were built in Beijing. However, Lillehammer added only 300 apartments to its housing stock, according to the research conducted by international real estate agency Gordon Rock.

The study analyzed the real estate markets of twelve Olympic host cities: summer Games (Barcelona-1992, Atlanta-1996, Sydney-2000, Athens-2004, Beijing-2008, and London-2012) and winter Games (Lillehammer-1994, Nagano-1998, Salt Lake City-2002, Turin-2006, Vancouver-2010, Sochi-2014).

 

Preparation for the Olympics

A rise in property prices before the Olympics was observed in all studied cities, except for Salt Lake City. Firstly, it is a deep American province, and secondly, the real estate market in the state of Utah showed negative price dynamics, explained Stanislav Zingel, President of Gordon Rock. The price growth dynamics varied in the twelve Olympic host cities: significant price increases of 40-55% over five years before the Olympics were reported in Sydney, Turin, Beijing, and Vancouver. Minor increases (5-10%) were observed in Lillehammer, Atlanta, Athens, and London.

After the Games

Usually, only those markets that experienced significant price growth saw declines after the Games. This was the case in Barcelona and Sydney (pre-Olympic increase in property prices in this Australian city was 50%, and the decrease after the Games was 20%). In Barcelona, the average housing prices decreased by 50% within one and a half years, almost returning to pre-Olympic levels.

Analysts did not find a correlation between construction volumes and housing price dynamics. For example, in Beijing, where a significant amount of housing was introduced for the Olympics, one would expect prices to decrease. However, this did not happen. The small volume of new housing did not lead to price increases in Lillehammer.

On average, each capital city built 2-3 thousand housing units (apartments, houses, converted dormitories) for Olympic athletes, and these volumes did not have a significant impact on the residential real estate market. However, a slightly different situation occurred in the hotel real estate market, where operators added hotel rooms, projecting demand for years ahead.

 

Hotels were in high demand

Experts analyzed the volumes of new hotel room supply brought in for the Olympics by hotel chains. The most significant increase in hotel room supply was observed in Lillehammer (+100%), Turin (+72%), Salt Lake City (+64%), and Barcelona (+35%). But the undeniable leader will be Sochi, where the number of rooms from certified hotel chains will increase eightfold. Meanwhile, the increase in hotel room supply in London was minimal.

"London did not even need additional hotels during the bidding process for the Olympics, so the main focus was on the construction of the sports facilities and a shopping complex. However, the main emphasis was on creating additional jobs so that after the Games, a large volume of residential development could be seamlessly integrated into the area," explained Irina Zharova-Rait, Managing Partner of Sesegar Investment Group. This policy led to a rapid increase in the prices of hotels in East London as commercial real estate. "Hotels in London are the type of real estate where, unlike other segments, investors are willing to pay whatever the sellers ask for. The largest influx of tourists is expected in the two years following the Olympics, so hotel prices have exceeded the inflation rate by 2%, while prices in other sectors have remained at the level of inflation," said Stanislav Zingel. Prices for hotels in London are already some of the highest in the world, but during the Olympics, they set new records. Olympic housing as a social project The Olympic Village was built on a 27-hectare site on the former grounds of factories and plants in the industrial district of Stratford. It is located near the center of London and has every chance of becoming a prestigious residential area like Shoreditch and Spitalfields after the Olympics, according to Ekaterina Rumyantseva, Chairman of the Board of Directors of Kalinka Realty. "Nine micro-districts, built like traditional English settlements, will make the Olympic Village a new landmark of London," says Irina Zharova-Rait. Land acquisition, demolition of factories, and land reclamation proved to be a difficult task. The government even had to resort to compulsory land acquisition orders, but the village was completed on time. "There were 300 landowners. Under normal circumstances, such a project would have taken 20-30 years, and the transformation of the area would have been impossible without the Olympics," said Matthew Black, Head of East London at CBRE. Construction in Stratford will continue even after the Olympics: over the next 20 years, 20,000 units of housing are planned to be built there. Of these, 6,000 houses and apartments will be built almost immediately after the Olympics. In addition, the authorities plan to provide 2,000 apartments in the Olympic Village for social housing. Experts believe that both social and commercial housing in the new area will be in high demand. Realtors predict high demand due to its proximity to the city center, convenient transportation, and a rich sports infrastructure. Within walking distance, there is a large park and the largest shopping and entertainment center in Europe, Westfield Stratford City (176,000 square meters, designed for 40 million visitors per year). Additionally, Europeans appreciate that this area was built in accordance with "green" standards, adds Irina Zharova-Rait. Demand will also be stimulated by the fact that very little housing was built in London during the post-crisis period, while the population of London has increased. "The