London’s successful Olympic bid team arrives home amid sombre scenes after yesterday’s bomb blasts but the terrible events won’t affect markets and housing for long, if at all.

London won the right to host the 2012 Olympics on Wednesday and Halifax has examined the link between hosting an Olympic Games and the impact on house prices of previous Olympic cities.

The regeneration effects from hosting an Olympic Games has generally had a positive impact on house prices. Each of the previous four host cities have seen house prices rise by more than the national average over the five year period in the run-up to the Olympic Games, the main period of Olympic related development activity. The level of out-performance was, on average, 18 percentage points.

Barcelona was the best performer with prices rising by 131% versus an 83% increase in Spanish house prices in the five years leading up to the 1992 Olympics.

Key Findings:

Hosting an Olympics is usually associated not only with an increase in sporting facilities but also an upgrade of transport and cultural/leisure facilities. Barcelona Athens and Sydney all saw a significant upgrading of their urban infrastructure and this city rejuvenation is likely to encourage higher house prices.

In Barcelona, amongst the Olympic related projects, 78 km of new roads were created. There was a 17% increase in the sewage system, a 78% increase in green zones & beaches and a 268% increase in the number of ponds & fountains.

The scale of Olympic redevelopment is reflected in the high costs associated with hosting an Olympics. The Barcelona Olympics was the most costly of the recent Games at an estimated cost £8.1bn. The estimated costs for other Olympics were for Atlanta £1.5bn, Sydney £2.5bn and Athens £8.0bn.

Tim Crawford, Group Economist at Halifax, said: This is great news for London. Hosting an Olympic Games encourages city regeneration and is usually accompanied by an improvement in facilities and transport links. These factors tend to be positive for house prices."

"Homeowners in Hackney and Stratford, could potentially reap similar benefits to other Olympic precincts over the longer term."

Regeneration boosts prices in Olympic surrounds at Sydney 2000 Games

Areas close to the Olympic complex usually see the largest increase in house prices as they benefit from improved facilities and better transport links. This was clearly evident in the main area of development for the Sydney Olympics, Homebush Bay, a former industrial site 20 minutes from the centre of Sydney. House prices in Homebush rose 70% in the five years in the run-up to the Olympics, compared to a 50% increase in Sydney house prices.

In Atlanta house prices rose by 19% in the five years leading up to the 1996 Olympic Games. This compares with 17% price growth in Atlanta's home state, Georgia and 13% growth in the US over that period.

Looking forward to the 2012 Olympic Games

East London will see a massive upgrade in facilities from hosting the Olympics. The area would benefit from a 500 acre Olympic Park reaching from the Hackney Marshes to the Thames, which is planned to include an Olympic stadium, aquatic centre, along with several other sporting complexes and a 17,800 person Olympic village. It is estimated that there will be 5,000 new homes on the site post the Olympics.

There are also proposals for a 45% increase in capacity on the London Underground's, Jubilee line, along with plans for the creation of a transport hub in Stratford only 7 minutes by train from Kings Cross station and designed to carry 320,000 people per hour.

Signs of a Commonwealth Games effect in the housing market

Here in Britain, the Manchester Commonwealth Games prompted redevelopment and rejuvenation of central Manchester and provided a spur to house prices in the area. In the five years leading up to the 2002 Commonwealth Games house prices in central Manchester rose by 102% versus a 52% rise in prices in the North West and an 83% increase in prices across the UK.

Five years before the Manchester Commonwealth Games, house prices in central Manchester, at £48,796, were 23% below the average for the North West region. At the end of the Games year, prices in central Manchester, at £98,461, were 2.5% higher than the North West region average of £96,048.

In other Commonwealth Games cities the house price effect has been less pronounced.

In Kuala Lumpur, host of the 1998 games, house prices were up 48% over the five years to 1998 versus a 40% rise in Malaysian house prices. However, house prices in Kuala Lumpur and the rest of Malaysia dropped more than 9% in 1998 as the country suffered the ill-effects of the Asian crisis.

Additionally, house price performance in Melbourne, host of the upcoming 2006 Commonwealth Games, has lagged behind the national average. They are up 23% since the end of 2001 versus a 45% increase in Australian house prices. A large increase in the supply of city apartments has limited house price growth in Melbourne.