Hampstead Property Market: A Game of Two Halves?

Posted on May 12th, 2017.

Even with the General Election on the horizon property values in Hampstead are still 1.41% higher than they were 3 months ago. The diversion and ambiguity of an election typically makes house sellers who need to sell, price their property more realistically (although this only lasts a couple of months). Looking specifically at it from a Hampstead landlord’s point of view, the Hampstead properties favoured by investors are in short supply in many parts of the suburb because of a number of factors. One of the factors has been that we have seen the number of second time buyers coming to purchase their next home decrease over the last 12 months in Hampstead.  Another factor has been the fact that banks have been pushing ‘let to buy’ (yes ‘let to buy’ is different to ’buy to let’) to homeowners (more of ‘let to buy’ in an up and coming article). Next, because of the banks, who are chasing low risk landlords with high deposits with very low mortgage rates- and the low risk landlords with high deposits tend to be attracted to the safer modern two and three bedroom apartments and town houses in Hampstead.

As I mentioned a while ago, the change in the Pension rules means buy to let landlords can use some, or all, of their pension pot to buy a property.  It shouldn’t be forgotten there are tax implications taking more than a quarter of your pension pot out (see the article from a couple of weeks ago) , so whilst many pension pots may not be able fund a suitably big enough tax free lump sum to buy the property outright, for most it will provide enough for the 25% deposit (required by most BTL mortgage providers). As a reminder to landlords, the interest paid on the mortgage against your tax liability is going to be cut back to 20% from 2017 to 2020.

In the last 12 months, I have noticed a particular uplift in interest from ‘50 something’ Hampstead people wanting to become landlords for the first time. In Hampstead, the highest returns for the lowest investment are at the lower end of the market, that is studio, one and some two bedroom flats . Unfortunately, flats with one bedroom are coming to the market in smaller numbers than the larger four bedroom properties in top end sector of the Hampstead property market. When looking at the actual numbers, in the later part of the Summer of 2016 in Hampstead, in one month alone 67 one bed apartments were on the market in Hampstead. However, in January this year, a notoriously excellent bumper month for properties coming on to the market, there were only 51 one bed apartments on the market in Hampstead to choose from. Today, that figure stands at only 27..whilst the number of four and five beds has increased significantly …  interesting don’t you think?

See the graph below with the latest figures from the Land Registry

At that lower end of the property market in Hampstead, (ie where first time buyers and landlord investors compete with each other to buy those smaller properties), I believe throughout 2017, there will be a slow and steady tipping of the scales between supply and demand. In fact, from what i am seeing and hearing, early anecdotal evidence has suggested over the last few months (although we will need to look at figures later in the Summer once we have the data from The Land Registry), we are beginning to see a polarised Hampstead property market. We will have high demand but low supply at the bottom end of the property market, yet high supply but lower demand at the top of market… and that can only mean one thing … prices will go up quicker on the smaller properties than the larger ones thus narrowing the gap for people looking to move up market.