Now that the dust has settled somewhat from the result of
the EU Referendum, the local market has become somewhat subdued and i expect
that the ferocious rise in house prices we have seen over the past 2-3 years
will stabilise of the next 12 months. We have seen the share price of these
large house builders drop significantly since June 23rd though it’s
this supply and demand imbalance that brings me on to what I see unfolding as a
long term trend in the Hampstead property market.
During my school years, my parents seemed to move every
other year (or it seemed that way). In reality, looking back at the house moves,
we actually moved three times before I left home. However, despite my parents
keeping the removal van people in business whilst I was
at school, from research I have carried out it shows things have changed
considerably in Hampstead over the last few decades, and interestingly, the
trend is getting worse ... for the removal van people at any rate!
In Hampstead, there are 10,140 properties. However, after we
remove the 1,046 council houses, 3,751 privately rented houses and 259 houses
where the occupants live rent free, that leaves us with 5,084 owned properties
(be that 100% outright, with a mortgage or shared ownership). This means 50.1%
of the properties in Hampstead are occupied by the owner (the national average
is interestingly 64.2%) but the number of people who have sold and moved house
in Hampstead, over the last 12 months, has only been 557. This means on these
figures, the homeowners of Hampstead are only moving on average every 18.2
years.
These are the reasons. Firstly, the cost of moving house has
risen over the last twenty years. Secondly, with many remortgaging their
properties in the mid 2000’s before the price crash of 2008, there is a
reluctance or inability in a small minority of homeowners to finance a home sale/purchase,
due to lack of equity. These are both factors driving fewer moves by existing
homeowners.
However, the big effect has been the change in house price
inflation. Back in the 1970’s and 1980’s, house prices were doubling every 5 to
7 years. Even in Greater London, with its stratospheric property price
increases over the last few years, it has taken 14 years (August 2002 to be
exact) for property values to double to today’s levels.
This change to a relatively low inflation Hampstead property
market (i.e. Hampstead property values not rising quickly) is significant because
the long term consequences of sustained low house price growth is that it eats
into mortgage debt more slowly than when property price inflation is higher. Hampstead
homeowners cannot rely on inflation to shrink their debt in real terms as much
as they did in say the 1970’s and 1980’s.
So what does this all mean for Hampstead buy to let
landlords? Well for the same reasons existing Hampstead homeowners aren’t
moving, less ‘twenty something’s’ are buying their first home as well. Hampstead
youngsters may aspire to own their own home, but without the social pressure
from their peers and parents to buy their first property as soon people reach
their early 20’s, the memory of the 2008 housing crisis and the belief the hard
times either aren't over or the worst is yet to come, current and would-be
homeowners are warming to the idea of renting. I also believe UK society has changed, with the
youngster’s wanting prosperity and happiness; but wanting it all now...
instantly... today... without the sacrifice, work and patience that these
things take.
As a society, we expect things instantly, and if it doesn’t come
easy, doesn’t come quick, some youngsters ask if it is really worth the effort
to save for the deposit. Why go without holidays, the newest iPhone,
socialising four times a week and the fancy satellite package for a couple of years.
To save for that 5% deposit if there is no longer a social stigma in renting or
pressure to buy as there was... say... a generation ago?
Even though,
in real terms, property prices are 5% cheaper than they were ten years ago
(when adjusted by inflation), 36.9% of Hampstead
properties are privately rented (nearly double what it was twenty years ago). As
a result, the demand for rental properties continues to grow from tenants,
meaning those wishing to invest in the buy to let market, over the long term,
might be on to a good thing. For advice and opinion on the Hampstead Buy To let
property market, give me a call on 020 7435 0420 or you can email me chris@ashmoreresidential.com Another 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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