£1bn 'black hole' after Games site is overvalued

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The London Development Agency says the 500-acre park it owns in Stratford may only be worth £ 800million after 2012.

The official estimate is £1.8billion - based on an annual 16 per cent increase in local land prices over the next 15 to 20 years.

The lower estimate, disclosed by the LDA at the London Assembly last week, is based on an annual six per cent increase in land values. This would barely cover the £650 million cost of assembling the land.

Some estate agents believe even that valuation may be optimistic, and forecast rises of 4-5 per cent. They have reported increases of up to 20 per cent over the past decade but some believe land values have now peaked.

The LDA's chief finance officer Andrew Travers told the London Assembly that after taking independent advice from land and property consultants it was planning for a £800million return.

The LDA has since disclosed that a new report commissioned from estate agents Knight Frank has produced three different figures - £836million based on a rise of six per cent, £ 2billion (16 per cent) and £3billion.

Official estimates on Olympic land values were made last year in a Memorandum of Understanding signed by Mayor Ken Livingstone and Olympics minister Tessa Jowell. It commits them to pay back any pubic money spent on the Games from the receipts from selling off the Park. That will not happen until the LDA has covered its £650 million costs.

A spokesman for the Department of Culture, Media and Sport said: "There is absolutely no blackhole in the 2012 finances, and these claims are completely misleading.

"The £800million quoted is the most cautious of a range of LDA projections of how much might be raised by land sales in the Olympic Park, based on six per cent per annum growth. This is significantly less than the average rate of increase over the last 20 years - a period that has included both economic highs and lows. "

After 2012, large parts of the 500-acre Olympic Park in the Lower Lea Valley will be sold off for redevelopment. The Mayor's Office believes homebuilders will be able to charge a premium because of the green space and worldclass sports facilities nearby.