With the Olympic Games kicking off in Rio this week, we ask how holding the Olympic games can have an impact on the property market of a country or city.
More often than not, the Olympics provides a flow of funding into the host city or neighbourhood to regenerate it and make it ‘suitable’ for public viewing and to sustain the numbers of people who will visit and participate in the games themselves. Let’s call this a government level attempt at Keeping Up With the Jones’. The inflow of funding establishes some truly exciting opportunities, often expanding the boundaries of cities or towns further, providing additional facilities and enhancing transportation networks. The enhanced facilities and transportation networks in turn attract more discerning residential investors, additional retailers, hotels and a plethora of other markets to the area.
But does this lead to an increase in residential property prices and improved rental opportunities?
Well, frankly speaking, rental opportunities may be enhanced by the Olympic games in the vicinity of the Olympic arenas during the games themselves, but any other anticipation of rental opportunity needs to be based purely on demand in the city. That being said, a previously unappealing area can become desirable resulting from the substantial investment in the Olympic games thereby making it more likely to secure tenants and higher rents than previously, assuming there is the market and there is no oversupply of rental accommodation.
Property prices essentially follow the same logic. The risk in property prices is substantial over development which outstretches the real demand for property in the Olympic area. Any substantial oversupply can in fact damage house prices in the area. However, the amenities and infrastructural development which accompany the hosting of an Olympic ordinarily enhance an area, increasing demand.
Past Olympic Winners!
Let’s take a look at some of the most recent hosts of the Olympic games and the impact on the property market:
Already popular with elite Russian holiday makers as one of the country’s most appealing resorts, often referred to as the St Tropez as Russia, Sochi in the run up to the Olympics 2014 attracted investment from Russians looking for second homes as well as from foreigners, many of whom had never heard of the area which was previously relatively without international exposure. In the month leading up to the Olympics, property portal Idinaidi‘s reported a 177% increase in searches for property in the area. The government invested in the region of US$ 50 billion in the infrastructure and preparation for the games, transforming the town completely.
In the run up to the games, sales were strong amongst new developments of apartments as well as some of the larger traditional coastal homes. In the month that Sochi was announced as the host of the games prices increased by 13%.
After the Olympics, is the appeal still appealing? With prices at the close of the Olympics in the region of US$ 1,700 per square meter, Sochi prices for Black Sea property were pretty high when compared to Bulgaria. But one year after the Olympics came to their conclusion, with the sanctions imposed on Russia, Russians turned their depreciating Roubles to invest in property in Sochi driving prices upward further. According to Knight Frank’s ranking of prime ski resorts, despite the oversupply of chalets, the huge investment from the Russian market caused prices to increase. Between June 2013 & 2014, prices increased by 4% and the resort was ranked the 11th amongst the worlds top ski destinations.
London hosted the Olympics in 2012, selecting Stratford as its primary Olympic Park location providing a much needed regeneration of London’s most easterly extents. The announcement of London’s successful bid in 2005 was the start of some speculative investment into real estate in the olympic areas and in the six years prior to the Olympics, according to Zoopla, house prices increased in Olympic areas by 11.9 per cent, outstripping the 7.2 per cent average national house price growth. In the capital, the growth didn’t quite keep pace with the huge gains made in London, but they still showed a growth of 18.9 per cent, more than double the national average.
Change in property values in Olympic areas between July 2005 and July 2011 (%)
|Olympic Area||All Areas|
But, the question is, was this sustainable after the games had finished? Did property in these areas keep pace with national growth or did these areas stagnate compared to the rest of the countries house price growth?
According to Lloyds Bank, prices continued to rise in the vicinity of the Olympic Park after the Olympics. The average property price in the nearest 14 postal districts increased by 84% or £172,693 between July 2005 and March 2015, equivalent to a monthly increase of £1,476 this being twice as fast as the average in England and Wales. Between March 2014 & March 2015, house prices in this area increased by 13%, outperforming London as a whole which showed average price increases of 10% in the same period.
Vancouver bucks the trend somewhat. Driven in part by Olympic fever and in part by a growing market, investors jumped in buying property in the Olympic Village area with both feet in the run up to 2010 when prices hit $2,000 per square meter. The development of the Olympic Village was an expensive affair. With the 2008 recession, the developer granted the project reneged on its commitment as it went bankrupt and left Vancouver City holding the baby. As if my magic, the City managed to develop the project themselves, but at huge cost and a lack of sales meaning that it was something of a ghost town for the years immediately following the Olympics with a reputation for poor workmanship. Just four years later in 2014 however, the condos in the Olympic Village became some of the City’s most desirable real estate and all of the original inventory was sold off by the city concluding in a bulk deal for CAD $91 million for the final 67 condos in the whole project.
Beijing pumped over US$ 1 billion into the infrastructure of the city especially around the Wangjing area immediately adjacent to the Olympic Village. Huge improvements were made to the transportation system of the city in addition to regeneration of a number of dilapidated areas of Beijing. The airport also received a makeover with a new terminal intended to support the increased visitors to the city during the games. From 2002 until the Olympics, house prices in Beijing increased 4% average per year, compared to under 0.5% in the previous period. Property prices in Beijing continue to grow at a slow and steady pace with careful control over stock, but whether this is attributable to the Olympics or just a growing city lacks any real evidence.
Going for Gold?
The hosts of the Olympic Games until 2022 have been selected. Pyeongchang, Tokyo and Beijing will be the next hosts. So how will their property markets fair as the Olympics come to town?
We think that Pyeongchang and Tokyo should see some growth owing to regeneration and expansion of the areas, Pyeongchang in particular but anticipate that Beijings return will be far less given that it hosted the
And what of the future candidate cities? The four candidate cities for the 2024 games are Rome, Paris, Budapest and Los Angeles with the host to be announced in September 2017. Keep an eye on the results for a chance to get in early!