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 £755,936 in the area, an
impressive rise of 313.2% and terraced/town house have risen in the same time
frame, from £573,608 to £2,105,946, another substantial rise of 253%. 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 91% and the terraced owner would
have seen an increase of 116%, as they were selling for on average £973,571 ...
not bad until you consider inflation.
See the graph below
that illustrates this – Source Land Registry
Since
2005, inflation, i.e. the cost of living, has increased by 35%. That means to
retain its value, the Hampstead terraced property bought for £973,571 in 2005 needs
to be worth £1,314,320 today. Therefore, our landlord has seen the ‘real’ value
of his property increase by 81% (i.e. 116% less 35%
inflation).
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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