London's lost peninsula

Thursday afternoon, and London SE16 looks estate-agent perfect. The lightest of breezes tickles the gleaming surface of Greenland Dock, while vivid blue skies put a sheen on south-east London's cul-de-sac.

You wouldn't go to Rotherhithe by accident. This blob of land protrudes from the south bank of the Thames a mile downstream from Tower Bridge. Like Norfolk and Tierra del Fuego, the Rotherhithe Peninsula is en route to nowhere, a corner of Docklands isolated from life's routine traffic.

The indigenous people still call it The Island. For most of the last three centuries it was a hive of maritime activity known as Surrey Docks. Deep trenches were cut into the flat terrain; the biggest, Greenland Dock, penetrates half a mile inland. In the last century it was the busiest timber port in the world, handling lumber from Scandinavia, Canada and Russia.

Faded sepia prints in the Three Compasses pub make the area look like Venice in the rush hour, illustrating the sheer energy involved in transacting the world's trade. When the bridges linking Rotherhithe with the rest of London were raised simultaneously to let shipping through, the peninsula became literally insular.

Nowadays "Surrey Docks" is a misnomer. The Surrey frontier has long since retreated to leafy avenues south of Croydon, while most of the docks have been filled in and built upon. Rotherhithe lost its raison d'etre when trade moved down river. For a decade, it decayed. Warehouses crumbled, while docks filled with abandoned Cortinas (and, if you listen to pub gossip, out-of-favour gangsters). Yet now it has become a square mile crisscrossed by waterways and thick with new residential property.

The London Docklands Development Corporation's rescue package for this patch of dereliction was not wholeheartedly welcomed by all local residents. Many felt that the partnership between the LDDC and the community was subservient to profit. According to one local, "The LDDC promised everything, but didn't deliver". She points across the street, where a rice mill, lard mill and lead mill once fuelled the local economy. Now signs direct you along the Thames Path, which winds through housing estates on its journey to the river's source, or towards the youth hostel - a utilitarian Nineties block. "It used to be a working river, but they've turned it into a leisure complex. These days people haven't got the money for leisure."

The Island certainly has more than its fair share of recreation, with a veritable maritime theme park on the doorstep. Most homes are closer to an activity opportunity than they are to the shops. You can learn to sail or windsurf on Greenland Dock, or stroll in Ecological Park. On Lavender Pond, constructed to maintain the water level in the docks, anglers fish for roach, rudd and bream. There is even a farm, with goats and geese and a cow to break the duck of any Londoner who professes never to have seen one.

The beneficiaries of these amenities split into two camps. In the red corner, speaking broadly politically, are the people who grew up here. They have lived through prosperity when the docks were booming, austerity when trade dried up, and perplexity at changes being wrought around them. Long-term residents of other parts of Southwark have moved in too; in a borough which includes the twin horrors of the Elephant and Castle and the North Peckham estate, the new-ish council housing in Rotherhithe compares well despite the distance to the Surrey Quays shopping centre (starring Tesco and BHS). Plenty of tenants took advantage of "right-to-buy" legislation, and some are now selling three-bedroom homes at around the pounds 100,000 mark.

The blue corner is occupied by professionals attracted by the proximity to central London. "One of London's oldest villages" is the description of Rotherhithe by the local council, Southwark. Yet any villager who returns after an absence of a decade would barely recognise the place.

North Southwark and Bermondsey, the constituency that takes in most of Rotherhithe, has the lowest proportion of owner-occupiers in the country: 2.6 per cent. That figure is increasing rapidly as the core of council housing becomes fringed by a ribbon of private development, exploiting the bulge of shoreline that bestows Rotherhithe with some of the finest Thames frontages on the whole river.

Barratt has bought a broad arc of shoreline and christened it Prince's Riverside. The blocks containing the 184 apartments are typical of the area: straightforward brick construction topped with gently raked slate roofs. One-bedroom south-facing flats with balcony start at around pounds 100,000. Although these are sunny, they face away from the river. For a top-of- the-range, two-bedroom apartment with a river view, you could pay pounds 205,000. Units are selling quickly. Quayside Lodge, the original show block of 16 apartments, is all sold, and by yesterday only 28 units remained in the rest of the development.

What is remarkable about these prices is that they have been achieved despite the fact that Rotherhithe is the most transportationally challenged place in London. Its underground station lies on the East London Line, which rattles sullenly between the unfashionable termini of New Cross and Shoreditch. Or rather, it used to rattle: the line that Brunel built as the world's first underwater tunnel closed a year ago for repairs. Work was due to finish last October, but there is still no sign of the line reopening. So public transport presently consists of two bus routes: P11 to Waterloo, and 225 to Lewisham (but not on Sundays).

Yet to find out why buyers, developers and prices are so buoyant, you need only steer along Surrey Docks Road. Locate a series of concrete circles in the middle of a building site, and look for the London Transport roundel and the magic words "Jubilee Line extension" painted on the hoardings. A year from now, the new underground line is due to open. Canada Water station, near the heart of the Island, will be 10 minutes from the West End and even closer to the financial services and newspaper community at Canary Wharf.

The notices at the station site now carefully specify "site completion March 1998"; no promise is made about the start of Tube services, but the word is that it could be a year later. Already, though, prices take account of the new infrastructure. Property values have been on a ride that mimics the twists of the Thames. At the opulent riverside development at New Caledonian Wharf, a fifth-floor apartment sold for around pounds 145,000 in the late Eighties. By 1992, it was on sale for half that figure. But now the value has been restored, and reflects amenities such as a swimming- pool where residents can float and muse at the prospects of Canary Wharf, gleaming glibly from across the river.

Close by is one of the few pubs that have survived both the Blitz and the developers. The Ship & Whale overlooks the vast, dark wound known as Greenland Dock. Great ships were built here - including, in 1823, the Rising Star, constructed for the Chilean Revolutionary Army, the first steam ship ever to enter the Pacific.

How distant that now seems, you may reflect as you survey the modern yachts moored in a Postmodernx development. But if you happened to be in Rotherhithe on Thursday afternoon, you would have seen a replica of Cook's Endeavour go sailing by.