by Lea Emery on 28th January 2019
While “the Waitrose effect” gets a lot of property press, it might time to start talking about the Starbucks effect instead. A Lloyd’s bank reported showed that having a Waitrose in the area can add 12 per cent to the price of a property — which can easily translate tens of thousands of pounds. But is there a new symbol that we should be looking for as a harbinger of middle-class buyers? It may be that, in 2019, it’s all about the coffee shop.
In a way, it makes sense. Hipster coffee shops have become a property expansion joke — as the skinny jeans and flat whites approach, you know that property prices are set to rise. But is there actually a relationship – and is it something you should consider when moving or assessing your house price? Well, it seems that the Starbucks effect is real, but it’s a little more complicated than cause and effect. Here’s what you need to know.
Research Shows The Starbucks Effect Is Real
Coffee shops are definitely associated with higher house prices. In fact, Zillow — a US property site — found that over 17 years homes located near a local Starbucks nearly doubled in value as prices went up by 96 per cent. Meanwhile, those not close to a Starbucks only went up by 65 per cent over the same period — so the coffee chain is clearly tied with the boost. That being said, not all chains are created equal — a cheaper chain was only associated with 80 per cent growth — higher than average, but not as high as Starbucks. The change can be quick, too. A Harvard Business School study found that a Starbucks was tied to a .5 per cent price boost in an area the following year.
For some people, the change is much more obvious. Julie Lerch was able to sell her property for a 53 per cent increase after only three years — something she attributes to a coffee shop nearby. "It was a sign that the neighbourhood was changing, and people who normally wouldn’t have changed that neighbourhood said, 'Oh, that’s a Starbucks,'" she told Forbes.
But Is It The Chicken Or The Egg?
Although the evidence seems clear, it’s important not to jump to the conclusion that it’s the coffee shops themselves that are boosting property prices. Michael Luca, an economics professor at Harvard Business School who ran the study, pointed out that it could just be that coffee shop location scouts, like the ones who work for Starbucks, are really good at predicting areas of gentrification. The things that make for a good coffee shop location, like a desirable neighbourhood, friendly foot traffic, upscale shops, new businesses opening, and a population that can afford to keep the coffee shop afloat — they’re also factors that are going to drive up house prices anyway. So a coffee shop may just be a sign that an area is gentrifying or expanding. Either way, it’s still a solid indicator that prices could be on the up — even if it’s not the coffee itself that’s driving the change.
Other Property Boosters
In addition to coffee shops, there are other indicators that prices may be heading up — and it’s not just Waitrose. Speciality grocers have been tied to a 17.5 per cent home-price premium, a Michelin-starred restaurant can boost house prices by 50 per centcompared to the UK average, and streets with trees between the pavement and the road can add a few thousand pounds to your property value.Of course, don’t forget the classic considerations like good schools, nice viewers, and travel links — they’re consistently importantly. But when all else fails, a tidy garden can also boost your property price, so those little considerations are important.
The Starbucks effect definitely seems to be in play, but it's always important to consider all of the factors of an area when deciding if it's a desirable investment. Unless, of course, you really need that daily morning latte, you need to look at the area as a whole to see if it's right for you.
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