Watery eyesore could turn into a hotspot for investors

A network of derelict watercourses flowing sluggishly through an ugly industrial area of east London is set to be transformed into an elegant city of canals under plans for the Olympics announced last week.

But investors keen to get in on the ground floor at the latest potential hot spot must be prepared for a wait of several years before prices rise.

The area, between Stratford and Bow, is highly polluted and almost entirely covered with low-rent industrial premises. And developers will have to compete for materials and workers with the massive Olympic project.

Known as the Bow Back Rivers, the old canals were dug around the River Lea (or Lee) to serve London's industrial powerhouse in the East End but were abandoned and unused by the 1930s. Since then, they have silted up and many of the locks have been blocked.

The northern area of Bow Back Rivers will be within the Olympic site - the main stadium will be located between City Mill River and Pudding Mill River. And the canals will be a vital part of the construction process.

British Waterways and the London Thames Gateway Development Corporation have just announced a huge regeneration programme for the Bow Back Rivers, with new locks to control levels (some of the waterways are tidal), restoration of towpaths and compulsory purchase of prominent eyesores.

The aim is to bring mixed developments into the area, with restaurants, shops and bars on ground level, and offices and flats above. Ultimately, the area will be a community and a destination in its own right.

To get people to move in will need a big investment in transport and security, says local estate agent Stefan Przepiora, of Winkworth in Stratford (020-8519 0006). "People like looking out over water but the area has poor transport links, making it necessary to buy a parking space," he says. "Walking along the canals on winter evenings is very threatening for a man, let alone women. It needs to feel a lot safer."

The few current residential developments with views over the Bow Back Rivers do not usually advertise the fact, largely because the views are horrible.

"We have a flat for sale in Otter Close that overlooks City Mill River but the other bank has car scrap merchants and unsightly factories," he says. The third floor, two-bed flat is on the market at £240,000. One-bed flats in the same block sell for about £170,000.

Developers have already been working in the area and contributing to the restoration of the waterways. Bellway's The Lock building fronts on to Stratford High Street and looks out on City Mill Lock, and Bellway paid for new, recently fitted lock gates. Complete restoration of the locks is part of the new regeneration programme.

Two-bedroom flats in the building currently resell at around £300,000, several through agents Felicity J Lord (0845 337 4438). Local manager Sam Samad says that canal views already add something to the value: "If you can get a flat up to the third or fourth floor, a canal view will put up to an extra £15,000 on the value, but above that level the canal view has less impact."

Regeneration will bring rich rewards to investors but not as rich as some enthusiasts, Samad believes.

"It is not the nicest place to live at the moment but analysts have been predicting a rise of up to 50 per cent," he says. "It will be more like 25 per cent."

The risk is that moving too quickly will overwhelm the market. A great deal of building is in the pipeline, Samad says.

"There are about 160 planning applications for developments in the area, with a minimum of 200 units," he says. "About 700 units will come on the market during the next two or three years."

Infrastructure improvements will need to keep pace to attract people to live in the area. "Roads will improve, and bars, restaurants and gyms will arrive," he says.

Investors must look at the long term, perhaps by investing in units that can be rented to construction workers in the short term and then improved for City and Canary Wharf workers when the Games are over.