Hampstead Buy To Let – Demand and Supply

Posted on June 23rd, 2017.

Following on from my recent article about extending or improving your investment property and in particular what had happened to the rents Hampstead tenants have had to pay since the Credit Crunch. Despite a recent fall averaging 5%, rents in Hampstead are 17 higher than they were in 2008. A Hampstead landlord has since rung me after reading the Hampstead Property Blog, wanting to know more of the story of what was happening to current rents in the area. The reason he asked was that his current agent hadn’t increased his rent for a number of years and was concerned if he was getting the best return from his buy to let investment.

The Hampstead rental market is all about supply and demand (isn’t it so in all parts of the economy?). On the supply side, 627 rental properties have come up for let in the last 31 days in Hampstead. It sounds a lot until you consider there are 4373 rental properties in the NW3 area, that means only 14.33% of the rental stock of properties are coming onto the market each month (it is normally around 25%).  One reason for this lack of new rental properties coming on the market is the fact that tenants seem to be staying in properties longer. My research shows that the average tenancy in the local area is now between 24-30 months.

See the pie chart below with the latest data from Rightmove showing the proportionality of available and occupied property (in the Private Sector) for the NW3 area.

With this lack of supply, newer tenants have to pay more to secure the property they want. And this is the crux of the matter …properties they want. Older properties in Hampstead, that haven’t been maintained, not recently decorated with shabby carpets have seen their rents drop like a stone. Tenants want either modern properties with all the mod cons or older style properties that have been presented to an exceptional standard – and they are prepared to pay for the privilege. Rents achieved for top quality properties in Hampstead in the last month have held on to last year’s level. Any properties, traditional or modern, put on the market in good or excellent condition will rent in a couple of weeks, or in some cases a matter of days.

Interestingly, looking at Hampstead property values, the Land Registry have just released their latest set of data on property values. Throughout April 2017, (the latest set of data), property values fell in Hampstead by 0.5%, however, they are still 1.3 % higher than they were a year ago.  When one looks at the regional picture, the Greater London average property values rose by 0.6% in the last month. The difference doesn’t concern me, as the regional and local property values always even themselves out over the months.

Looking forward, after considering all the statistics and talking to other property professionals, I expect property values in Hampstead to stabilise over the coming 12 months. In a forthcoming article, I will discuss how the number of properties changing hands each month has dropped considerably in the last 10 to 15 years in the area.

…And so back to our landlord. Each property is unique and so as his tenancy agreement allows him to inspect the property with notice to the tenant; we will be visiting the property next week. If you are interested in knowing more about the local property market, feel free to visit me at the office for impartial advice about how to maximise the income potential and value of your home or investment.