Hampstead Property Market – Summer time Blues?

Posted on July 7th, 2017.

The Land Registry has just released their latest set of figures for the Hampstead Property market. It makes interesting reading, as average property values in Hampstead have stagnated since June of last year. This leaves average property values just 0.3 % higher than 12 months ago, meaning the annual rate of growth in the area fell to its lowest level since January 2012. When we compare Hampstead against the regional picture, London property values fell by 1.2 % between April and June, from 5% the previous quarter.

Obviously this is a far cry from the price rises we were experiencing in Hampstead throughout 2014. At one point (August 2014 to be exact) property values were rising by 22.7% a year. All the same, even with the tempering of the Hampstead property values in 2015, property values are only marginally higher than a year ago, though once we account inflation of 2.9%, values have fallen in real terms. This is not good news for local homeowners who had been affected by the downturn after 2008, though they can take solace in the fact that prices today are 57% higher.

However, the thing that concerns me is that the average number of properties changing hands (i.e. selling) has dropped substantially over the last couple of years in the area. For example in April 2014 (see above), 90 properties sold in Hampstead but in April 2015, that figure dropped to 41. The most significant event that had bucked the trend in 2016 was the announced Stamp Duty hikes on both primary residences and second homes which saw a substantial increase in supply in the first quarter to 115 properties sold from January to April. In practice, chains need a buyer at the bottom to allow everyone to move, this was heightened by investors keen to avoid the 3% stamp duty hike that was due to take effect from April 1st. Interestingly, a Bank of England Survey of lenders revealed that the majority of those who sold where first time sellers looking to trade up, as opposed to the common assumption that there was a flurry of landlords selling to other buy to let investors. The surge in demand from investors who were in competition with first time buyers was used to help them get their foot on the next rung of the housing ladder.

I have been in the Hampstead property market for quite a while now and the one thing I have noticed over the last few years is the seasonality of the local market. Since the changes in Stamp Duty, I was curious about the number and type of homes selling and how the trends have changed. Below are the results from April 2016 to April 2017. (Source: Home.co.uk – House Prices Report for Hampstead 2016-17)

There is simply not as much choice of properties to buy in Hampstead and with its population set to increase by 10% over the next decade this will generally strengthen house price growth for the long term.