Well, as the Spring begins I
remembered that a few days before the Easter Holiday, I got chatting with one
of my out of town landlords who was back in Hampstead visiting his family. Brought up in Hampstead, he went to the Hampstead
School for Boys back in the 1970’s and is now a University Lecturer in central
London. To enhance his retirement, he
has a small portfolio of four properties in the area and wanted my advice on
where to buy the next property in Hampstead (as he lives in a college owned
flat and anyway, would never dream of buying where he lives in Kensington where
the average value of a flat is £1.62m and a house £4.1m Eye-watering to say the least!!).
Before I could advise him, I reminded
him that the most important thing when considering investing in property is
finding a Hampstead property with decent rental yields for income returns, yet
at the same time, it must have the potential for capital growth from rising
house prices over time. Going into 2016,
Hampstead landlords will be under more pressure to find the best permutation of
yields and capital growth, as extra stamp duty charges for buying properties
and a squeeze on mortgage interest relief will raise their costs.
However, (you knew there would be
a however) before we look at yield and capital growth, one important
consideration that often many landlords tend to overlook, is the propensity of
how likely the rent will increase. Interestingly,
the average rent of a Hampstead property currently stands at £3,918 per month,
which is a rise of 7.5% compared to twelve months ago (although it must be
noted this rise in rents is for new tenancies and not existing tenants).
Anyway, back
to yield and capital growth, the average value of an average Hampstead property
currently stands £1,541,700 meaning the average yield stands at 3.60% per
annum, which on the face of it, many landlords would find disappointing. That
is the problem with averages, so if I were to look at say just apartments
in Hampstead which are the sort of properties a lot of landlords buy,
in Hampstead over the last 12 months, according to the Land Registry,
the average value achieved for all of the apartments in the area is £928,478,
whilst the average rent for all apartments is £3,326 per month
(remembering these are still averages), giving an average yield of 4.29%.
However, if that wasn’t high enough, there are landlords
in Hampstead who own some specialist properties with specialist
tenancies, that are achieving even higher than that (e.g. Student or Houses
under Multiple Occupancy) – again it comes down to your attitude to risk
and reward (give me a tinkle if you wanted a chat about those sorts of
properties – although they can be fun and games!)
Ultimately investors want to be
making gains from both rent and house price growth. When
combined, the rental yield and capital growth gives you the return on
investment, and that is what I told our University friend from Kensington. Return
on investment is everything. So, looking at property values in Hampstead having risen in the last
year by 4.5% …. which means the current annual return on investment in Hampstead
for a typical apartment is 8.79% a year .... not bad.
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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