Hampstead Buy To let –Freehold House or Leasehold Flat?

Well my Hampstead Property Blog reading friends, as it seems to be all the rage with Jeremy Corbyn asking the PM questions emailed in to him at Prime Minster’s Question Time, I too wish to answer a question emailed into me from a potential Hampstead landlord last week. Nice chap, lives in Primrose Hill, and it turns out, after having a coffee with him, he works in IT, has a spare bit of cash (now the kids have flown the nest) and wanted to invest in his first buy- to- let property.

His main question was ... Do I buy a freehold house or a leasehold flat in Hampstead?

Most people will say freehold every time, because you own the land. However, it’s not as simple as that (it never would be would it!). The definitive answer though is to research what Hampstead tenants want in a specific part of the area.  The tenant is ultimately your customer, and, if they don't want to rent what you decide is best to buy, then you are not going to have a successful BTL investment. So starting with the tenant in mind and working backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply.

Leasehold flats and apartments in Hampstead are excellent in some respects as they offer the landlord certain advantages, including the fact a flat can be initially cheaper to buy. Yields can be quite good, offering better cash flow. The building will already be insured and yes there is a service charge, but it’s still for a service at the end of the day and that cost is spread between many others (i.e. when your freehold house roof goes, its falls 100% on your shoulders) and one of my favourites is that there is often no garden to maintain or blown down fences to replace!

However, some Hampstead leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Hampstead apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.

So what do the numbers look like? Well since 2003, the average freehold property in Hampstead (detached, semis and terraced) has risen from £1,159,883 to £3,790,000, a rise of 227% whilst the average Hampstead leasehold property (flats and apartments) has gone up in value from £385,241 to £940,138, a more mediocre rise of 144%.  See graph below.

I was really interested to note that of the 21,489 rental properties in the London Borough of Camden  area that the Office of National Statistics believe are either let privately or through a letting agency, approximately 90%  are apartments. However, there are 84,017 apartments in the whole council area (be they owned, council rented or privately rented), which represents 84.8% of the whole housing stock in the area (see the pie chart). This really intrigued me that, quite obviously, there is a very high proportion of Hampstead’s leasehold apartments/flats rented to tenants compared to detached, semi’s or terraced. Fascinating don’t you think? 

Every Hampstead apartment block, every terraced house or semi is different. Like I said at the start, the definitive answer is to research what prospective tenants want in the area of Hampstead they want. Demand for town centre apartments, near the nightlife and transport links can be popular and can offer the Hampstead landlord very good yields with minimal voids. However, Hampstead terraced houses and semis, whilst not always offering the best yields (although sometimes they can), they do offer the Hampstead landlord decent capital growth.

My advice to the prospective landlord as is to you- is do your homework.  One such website, which only talks about the Hampstead buy to let Property Market, is the Hampstead Property Blog,  www.NW3propertyblog.com  Another source of info many Hampstead landlords use is me! What many Hampstead landlords do, irrespective of whether you are a landlord of ours, a landlord with another agent or a DIY landlord, if you see any property in Hampstead, that catches your eye as a potential buy to let property, be it a terraced house, semi or flat ... email me chris@ashmoreresidential.com  and I will email you back with my thoughts (although I will tell you what you need to know .. not what you want to hear!)

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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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