One of my landlords rang me last week from Redington Road, after he
had spoken to a friend of his. Over Christmas, they were discussing the Hampstead
property market and neither of them could make their mind up if it was time to
either sell or buy property. If you read the newspapers and the landlord forums
on the internet, there is a good slice of doom and gloom, especially with
changes in the taxation towards landlords, new legislation on checking tenants
and the general uncertainty in the world economic situation.
I would admit, there are certain landlords in Hampstead who have over
exposed themselves in the last few years with high percentage loan to value
mortgages. Those mortgages, with their current (yet artificially low) interest
rates, will start to suffer, as their modest monthly positive cash flow/profit,
i.e. income (rent) less costs (mortgage, fees, tax), will become negative when
the tax and mortgage rates rise throughout 2017 and beyond.
It appears to me these landlords seem to have treated the Hampstead
Buy to Let market as a sure bet and have not approached this as a business and,
as a result, they will suffer as they thought "Buy a house - rent it out
so it covers the mortgage and make a few quid on top". These are the people who will be thinking
twice. I see opportunity everywhere and won't be stopping, I’m here to stay. It’s
going to be an exciting year.
Gone are the days when you could buy any old flat or
house in Hampstead and it would make money.
Yes, in the past, anything in Hampstead that had four walls and a roof
would make you money because since WW2, property prices
doubled every seven years … it was like printing money – but not anymore.
True,
since January 1997, the average price paid for a Hampstead flat/apartment has
risen from £177,376 to today’s current average of £725,467 in the area, an
impressive rise of 309% and terraced/town house have risen in the same time
frame, from £573,608 to £1,996,158, another substantial rise of 248%. However, look back to 2005, and
in that year, the average flat was selling for £395,380, meaning our Hampstead property
owner would have seen a more modest rise of 83.4% and the terraced owner would
have seen an increase of 105%, as they were selling for on average £973,571 ...
not bad until you consider inflation.
Since
2005, inflation, i.e. the cost of living, has increased by 33.4%. That means to
retain its value, the Hampstead terraced property bought for £973,571 in 2005 needs
to be worth £1,298,743 today. Therefore, our landlord has seen the ‘real’ value
of his property increase by 71.6% (i.e. 105% less 33.4%
inflation).
The
reality is, since around 2004/2005 we haven’t seen anything like the capital
growth in property we have seen in the past and it’s not predicted to grow at
the rates it has previously done either. So it is high time anyone considering
investing in property stopped believing the hype and did some serious research
using independent investment expertise. You can still make money by buying the
right Hampstead property at the right price and finding the right tenant. However,
remember, investing in Hampstead property is not only about capital growth, but
also about the yield (the return from the rent). It’s also about having a
balanced property portfolio that will match what you want from your investment
– and what is a ‘balanced property portfolio’? Well we discuss such matters on
the Hampstead Property Blog ... if you haven’t been, then it might be worth a
few minutes of your time? 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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