I was reading a report the other day produced by the
Halifax, about the UK property market and why more and more of the younger
generation seem to be renting rather than buying. I find it fascinating that
over the last ten years, the British obsession of buying a house almost as soon
as you left school, and the fact that if you rented you were seen as a second
class citizen, has turned on its head to a point where the hopes and dreams to
own a desirable home will be replaced by the ambition simply to live in one.
In the latter half of the 20th Century, you left school, got
a job, bought a small house and kept buying and selling property, constantly
upgrading until eventually they carried you out in a box. However, the perceived
shame and stigma of renting is no longer the case, as it seems that the British
are now beginning to accept a lifetime of renting. This is a very important
consideration for both Hampstead homeowners and Hampstead landlords as it will transform
the way the Hampstead property ladder looks in the future and I might ask whether
or not it will exist at all for some people? The make up of households is one
important factor, especially in the Hampstead property market. The normal
stereotypical married couple, two kids and a dog of the 1970’s and 80’s has
changed. More and more we have the need for larger houses where two families
come together after divorces (+ kids) and need a property to house everyone
through to an increase in the number of one person households.
Looking at the data for Hampstead, of the 4,124 private
rental properties in the Camden Council area, 39.33% of those rented properties
are one person households (1,622 properties). However, when we compare the
number of one person Hampstead households who have bought their own property
with a mortgage (ie therefore they are still in work), of the 4,528 owner
occupied households in the area, only 601 of those properties are a one person
household (ie 13.27%). Compared to a decade ago, this explosion in demand for
decent high quality rental properties that one person households require has
not been met with an increase in supply of such properties. More and more I believe Hampstead landlords
need to consider this change in the make up of Hampstead households, as I
believe this could be an opportunity. As an aside, another interesting stat
that raised an eyebrow was that 2.78% of those 4,124 rental properties (115
properties) are lone parents households as well. Again, another possible
opportunity that Hampstead landlords might want to consider in their future
investment plans.
It is true that the
Governments introduction in 2013 of the Help to Buy scheme, where first time
buyers only needed a 5% deposit, changed the perception of peoples’ ability to
buy without having to save ten’s of thousands of pounds for a deposit. However,
it might surprise you, 95% mortgages were re-introduced within six months of
the Credit Crunch in late 2009, so again it comes down to people’s own
perception. Many youngsters think they won’t get a mortgage, so don’t even
bother trying.
Coming back to the
deposit, it’s still a fact that once you start renting it becomes that much
harder to save for a deposit, regardless of the size. Interestingly, 7
out of 8 renters polled by the Halifax (86% to be exact) refuse to sacrifice
the quality of accommodation they currently live in to reduce the amount of
rent they pay in order to save for a deposit.
This is the crux and the real
reason why people aren’t buying but renting... and why demand for renting will
continue to grow in the future (ie good news for landlords). Hampstead
tenants can upgrade the quality and size of the property they live in for a
minimal rent increase. The average rent of a two bed property in Hampstead is £2,755pm,
a three bed is £1,761pm more at £4,516pm, whilst the average four bed rent is
£8,853pm. If you had to make that jump when buying, the monthly mortgage
payments would be stratospherically more than that! Without any social pressure and better quality
rental properties compared to a decade ago, we will
become a nation of renters within the next generation, as the UK is becoming
more like Europe, where renting is ‘the norm’. Who is going to supply all these
properties to rent? Landlords! Whether you are an existing landlord looking to
grow your portfolio or looking to become a ‘first time landlord’, my thoughts
are take advice from as many people as possible. However, as the majority of
landlords buy their buy to let properties in the same town they live, you will
need specific advice about Hampstead itself. One place for such advice and
opinion is the Hampstead Property Blog www.NW3propertyblog.com
If you are looking for an agent with experience that can help you find the right tenant for your property, then contact us to find out how we can get the best out of your investment property. Email me on chris@ashmoreresidential.com or give me a call on 020 7435 0420. Pop in for a chat – we are based on Ashmore Residential, Suite 7, 25-27 Heath Street, London, NW3 6TR. The kettle is always on.
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