The Land Registry has just released their latest set of
figures for the Hampstead Property market. It makes interesting reading, as
average property values in Hampstead dropped by 4.2 % in June. This leaves
average property values 2.1% higher than 12 months ago, meaning the annual rate
of growth in the area fell to its lowest level since January 2012. When we
compare Hampstead against the regional picture, London property values rose by 2.3%,
leaving them 6.1% higher than a year ago.
Obviously this is a far cry from the price rises we were
experiencing in Hampstead throughout 2014. At one point (August 2014 to be
exact) property values were rising by 22.7% a year. All the same, even with the
tempering of the Hampstead property values in 2015, property values are still
higher than a year ago. This is good news for local homeowners who had been affected
by the downturn after 2008.
However, the thing that concerns me is that the average number
of properties changing hands (i.e. selling) has dropped substantially over the
last couple of years in the area. For example in April 2014, 90 properties sold
in Hampstead but in April 2015, that figure dropped to 41. The most significant
event that had bucked the trend in 2016 was the announced Stamp Duty hikes on both
primary residences and second homes which saw a substantial increase in supply
in the first quarter of this year to 115 properties sold from January to April.
In practice, chains need a buyer at the bottom to allow everyone to move, this
was heightened by investors keen to avoid the 3% stamp duty hike that was due
to take effect from April 1st.
Interestingly, a Bank of England Survey of lenders revealed that the majority of those who sold where first time sellers looking to trade up, as opposed to the common assumption that there was a flurry of landlords selling to other buy to let investors. The surge in demand from investors who were in competition with first time buyers was used to help them get their foot on the next rung of the housing ladder.
Interestingly, a Bank of England Survey of lenders revealed that the majority of those who sold where first time sellers looking to trade up, as opposed to the common assumption that there was a flurry of landlords selling to other buy to let investors. The surge in demand from investors who were in competition with first time buyers was used to help them get their foot on the next rung of the housing ladder.
I have been in the Hampstead property market for quite a while now and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the Hampstead property market. The noticeable exception is this year with the Stamp Duty increases and the uncertainties over the EU Referendum. This has made an imbalance between supply and demand. Now that these significant events have passed, I foresee that there will be fewer houses coming onto the market. There is simply not as much choice of properties to buy in Hampstead and with its population ever increasing; this will generally strengthen house price growth for the foreseeable future.
So what does all this mean for Hampstead landlords or those
considering dipping their toe into the buy to let market for the first time? For many people, buy to let looks a good investment,
providing landlords with a decent income at a time of record low interest rates
and stock market unpredictability.
However, if you are thinking
of investing in bricks and mortar in Hampstead, it is important to do things correctly.
As an investment to provide you with income, for those with enough savings to
raise a big deposit, buy to let looks particularly good, especially compared to
low savings rates and stock market yo-yo’s. I must also remind readers,
landlords have two opportunities to make money from property, not only is there
the rent (income), but with the property market bouncing back over the last few
years, property value increases has spurred on more investors to buy property
in the hope of its value continuing to rise.
Savvy landlords with decent deposits can fix their mortgages
at just over 3% for five years, making many deals stack up. Nevertheless, low
rates cannot stay low forever, because one day they must rise and you need to
know your property can stand that test. I saw some Hampstead landlords
struggling in the mid noughties, when interest rates rose from 3.5% in July
2003 to 5.75% in July 2007. That might not sound a lot, but that was the
difference of making a £100 a month profit in 2003 to having to make up a
shortfall in the mortgage payments of £100 per month in 2007.
Its true many landlords were thrown a life raft when the
base rate dropped to 0.5% in March 2009. Whilst interest rates have remained
there since, mark my words, they will rise again in the future. However, even
with the potential for costs to rise, demand for decent rental properties
remains high as there are ever more tenants in the market, driving up demand
and thus rents. The British love of bricks and mortar plus improving mortgage
deals from some lenders also add up to fuel the buoyant Hampstead property
market.
If you are planning on investing in the Hampstead property
market, or just want to know more, things to consider for a successful buy to let
investment, give me a call on 020 7435 0420 or you can write to me chris@ashmoreresidential.com One
source of information 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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