I had an interesting conversation with a local Hampstead accountant the other day. He is quite an observant chap (I know this because I have known him for a few years … but I suppose you have to be if you’re an accountant!). He knew property values had decreased in the area over the past 6 months, but wasn’t sure by how much. He also thought the number of properties for sale in Hampstead (and more importantly ones with sold slips on them) had slightly decreased over the last couple of years.
The rate of house price inflation in Hampstead continues to slow with growth of 1.4% in the 12 months to February 2017 compared to annual growth of 14.5% in the preceding year 2015-2016, according to the latest Land Registry data. However, there is considerable local variation in our part of London, with annual house price growth (up to Feb 17) ranging from 2.15 % in Ken and Chelsea to -1.67 % in Hammersmith and Fulham over the last 12 months.
Hampstead has seen property values rise by 15.9% in the last two years, on the other side of the coin though, Hampstead has seen a slight reduction in the number of properties sold throughout 2016 as base line demand for housing tempers. The 9.8% drop in property transactions in Hampstead in 2016 (650 properties) compared to (721 properties) in 2015,or indicates a tempering of house market in Hampstead as affordability and tightening yields start to kick in.
When you compare London with the rest of the UK, you could be looking at two different countries. In London, its mid/late teens house price to earnings ratios are impacting demand (i.e. the average property value is often 15 or 17 times the average wage in London .. in fact in Hampstead, the ratio is in the early 30’s to 1). However, prices have remained strong because the number of people wanting to sell has dropped considerably, meaning that falling sales volumes combined with a general slowdown in activity in the run up to the General Election are resulting in lower mortgage approvals for home purchase.
Transactions are a great indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions. A similar pattern is being registered in the rest of UK, as pent up demand returns to the market supported by low mortgage rates. This is good news as other areas catch up with London, especially in the Northern cities, the UK property market will be more in balance as a whole across the Country.
It might be interesting to note though, the number of Hampstead property sales in 2016 are still 42.8 % lower than the level seen in 2007 (when property values were rising at an impressive 20.4% per annum). Despite the slowdown in house price over recent years, the market is far more robust than we think and from every correction follows a steady recovery. In fact, I believe the market will become focused on the middle to higher value areas (such as Hampstead) where households have equity and find it easier to access mortgage finance.