If stock can be acquired at relatively high yield and the stock is located close to a stronger market with scarcity of stock, then future growth prospects can be driven by the stronger dynamics of the neighbouring market as demand spills out. This is a question of judgment on the strength of the neighbouring market.

It can also depend on whether investment in transport or place are likely to improve the attraction of the lower value market. As an example, the map shows our analysis of places in London that are underpriced relative to their transport links and their quality of neighbourhood, measured by indicators such as health and crime.

Value gaps of 20% are commonplace and, where the barriers are significant, the upside is higher if regeneration can lift those barriers.

Taken from

Spotlight: Where Best to Develop and Invest in Residential Property Spring 2012