I am genuinely concerned about the Hampstead property
market, but in a way that might surprise you. The Land Registry data showed the average
‘achieved prices’ fell in June by 4.2% in Hampstead, leaving them 2.1% higher
than a year ago. Whilst it could be said that the recent monthly change is very
modest, in the same period a year ago, we saw a monthly fall of 0.4% in London,
which is more the norm given the onset of
schools breaking up and everyone going on holiday.
Looking at all the data on the Hampstead property market;
putting aside the need for more houses to be built in the next decade to
balance out the increase in population (helped in part by inward European
migration) but not matched by a similar increase in housing being built; my
research shows there is a widening gap between what property buyers want and
what is available to buy. In a nutshell,
many more buyers are looking for the smaller one and two bed properties (the
typical apartments, whilst there are a larger typical semi detached /detached
properties available.
Demand for smaller properties comes from both first time
buyers and the growing number of buy to let landlords, where it is more cost
effective and efficient to buy smaller properties to let out compared to larger
properties which tend to offer poorer returns. Also, landlords with larger
loans (on those larger more expensive properties) will also be hit harder with
the changes in the way tax is paid on buy to let investments,
which start in 2017.
If you recall, a few weeks ago I did some research on how
different types of properties had performed in Hampstead since the year 2000. I
revisited those calculations and it hit me how different types of properties
had performed over the last 16 years. In a nutshell, this mismatch of demand
and supply isn’t a new phenomenon, it’s been happening under our noses for
decades.
In the last 16 years, the average value of a terraced house in Hampstead has risen from £645,742
to £2,683,457 whilst the detached house has risen in value from £1,788,263 to £4, 025,000. Nothing seems amiss until you look at the percentage
growth. The terraced house has grown in value by 315.5% whilst the detached by
only 125% meaning the gap between the affordable terrace and expensive detached
properties has in percentage terms narrowed enormously (this isn’t just a
Hampstead thing, it has happened all across the Country).
I am concerned because more houses need to be built, not
only in Hampstead, but in London and the UK as a whole. In particular, there is
specific need for more affordable starter homes for the growing demand from
both tenants (and the landlords that will buy them) and first time buyers. The Tories need to face up to the fact that
unless they can get the builders, the planners (to release more building land),
the banks (to finance it) and themselves together, to ensure long term plans
can be made, and implemented, this issue will continue to worsen. Throughout my
research, I was curious about just how much land we have available, and I was astonished
to find that only 2.3% of Britain’s land is actually built on.
The country needs 240,000 houses a year or 1.4 billion
bricks to be laid in order to satisfy demand until the end of the decade, which
doesn’t even touch the proverbial sides, let alone reverse the imbalance
between demand and supply. Last year, only 141,040 properties were built, the
year before 133,400 and 146,850 in the year before that.
This means only one thing for Hampstead landlords. Unless
Teresa May starts to rip up huge swathes of the British countryside and build
on acres and acres of green belt, demand will always exceed supply when it
comes to property for the foreseeable future. The much awaited Autumn Statement
from the Chancellor, Philip Hammond will give us a clearer picture when we see
what the output figures for Construction and Infrastructure
projects/investments.
Therefore, investment in the local Hampstead property market
as a buy to let could be the best move to make as the stock market investments
have been quite volatile of late with the political headwinds over Brexit and
the cut in the Bank of England Base Rate to a historic 0.25%. Everyone is
different and trust me; there are many pitfalls in buy to let. You must take lots of advice and seek out the
best opinion.
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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