Last week my mother visited me while on holiday travelling around the UK, she had just returned from the home town of her father and was surprised by what she found. The neighbourhood had been described as the lowly poorer part of the town, but what she found was a very vibrant hipster town where the food was exciting and the homes expensive.
I began to wonder, why do the dodgy parts of town all too often reinvent themselves in a similar manner?
It may all be down to the housing crisis that has seen prices skyrocket and just one good restaurant in the area.
Young people struggle to afford rent, and buying a property is almost certainly out of the question for most. If they do buy or rent a home, they do so with their budget in mind, leading them to move to the dodgy neighbourhood.
They get comfortable living there, and as time passes their pay increases, instead of moving to a better area, they enjoy the extra money they are earning, spending it on nights out and a myriad of things.
They no longer need to resort to eating at the low quality cheap fast food places so they spend a little more and eat at the nice restaurant around the corner. The restaurant thrives while the cheap food places close down. Eventually another restaurant selling good quality food opens, thriving just as the other did. People begin to notice its success and spread the word. More restaurants/café’s open selling good food.
There are now plenty of good places to eat, but not much else to do after they have finished eating, someone realises and decides to fill that market by opening a club.
The club follows similar success to the first restaurant, and more clubs follow in a similar cycle to the restaurants.
The town now has good food and a good nightlife. By now, more and more young people want to live there driving up the cost of housing, so that only the slightly richer people wanting that nightlife can afford to live there.
The cycle repeats itself and the good restaurants are replaced by great restaurants and so on. This continues until an equilibrium is reached.
The equilibrium is based on two determining factors, how much a young person earns as they age, and their desire to live close to the nightlife as they age.
Eventually the desire for nightlife will dwindle for the older/richer residents and they will move to the upper class neighbourhood, they will be replaced by young energetic people who want the nightlife but can’t quite afford it yet, so they begin by living on a budget.
At this point you will have a neighbourhood with exciting food and nightlife which can’t get anymore expensive because the youth wanting the nightlife won’t be able to afford it. The equilibrium is reached.
The area will remain like this until it is replaced by another previously dodgy town with a cool new hipster edge. Thus continues the circle of life.
What’s the message in all of these ramblings?
If you are looking to buy an investment property in one of the dodgy parts of London, it’s probably a good idea to check out the local restaurants, if there are 3-4 newly opened restaurants selling good quality food it could mean prices are about to shoot up!
Adam Horan.Author: Woolley