The West Hampstead property market has been mirroring the rest of London with demand continuing to outstrip supply in our low interest rate environment. Although we don’t seem (yet?) to have any “ghost streets” caused by the super-rich buying houses that they leave empty, the nature of buyers in our area has been changing over the past few months, with implications for prices and the future of home ownership.
Out of 7,000 new homes built in London last year, more than 5,000 were sold to overseas buyers. It seems that the capital growth from such properties is such that these homes can stand empty for most of the year and only used as a place to stay occasionally when in town. Kensington Palace Gardens now has an average property value of £36m and, closer to home, even Frognal Way in Hampstead comes in at £9.5m!
Aside from the impact on house prices, which doesn’t help buyers, councils have also highlighted this as a growing economic problem for the local community: unoccupied properties create no demand for local services or shops leaving empty run down looking local streets.
Since the spring, we’ve also seen the introduction of the ‘help to buy’ scheme. Mortgage lending has risen 21% nationally since May and, according to Rightmove.co.uk, asking prices across the country have continued to rise.
London still remains an anomaly though: prices in the capital have jumped by an average of £30,000 since the start of the year, and are now 7% higher than they were before the financial crisis. In the rest of the UK, prices remain 9% down on 2007 levels.
What about West Hampstead? In terms of activity, we’re seeing new applicant levels on a par with last year, and instruction levels are similar although down slightly since the first quarter.
We have noticed a change in the mix of the type of buyer, however, especially the re-emergence of buy-to-let investors. Rental prices in London have risen 7.2% year-on-year, significantly outstripping inflation and interest rates. West Hampstead has always been attractive for these investors due to our transport links and type of housing stock, but these price increases combined with the demand from those who are finding it hard to get on the housing ladder means very healthy returns and strong capital growth. In fact, three of the last five sales we have agreed were to buy-to-let investors.
It is also noticeable that a large number of our vendors are moving out of London rather than staying locally. Rising prices and stamp duty make it impossible for many people to afford to trade up locally when faced with starting a family. We’re also seeing retirees cash in and enjoy the proceeds in a similar, cheaper property out of town or a second home abroad. Some estate agents in the Home Counties have reported a 20% increase in London applicants looking to move out. Is London becoming the new Manhattan?
The other trend we’ve seen is that buyers are becoming more price sensitive. Earlier in the year, buyers were more prepared to ‘pay what it took’ to secure a property. Buy-to-let investors are ruled by the head not the heart, of course, so if the deal doesn’t stack up they won’t proceed.
For the ordinary buyer, salaries are struggling to keep pace with house price growth and what may have been affordable three months ago is now out of reach. Naturally, vendors want to sell for more than their neighbour did and are also constantly consuming the price rise headlines. Throw in estate agents who are desperate to secure instructions in a highly competitive market with limited stock and it’s easy to see why asking prices are continually rising. Nevertheless, we have recently found that viewing numbers on overpriced properties are now very low whereas at the beginning of the year and last year buyers would still take a look. Dare I say it, could things be starting to cool down?
Overall, if you are thinking of selling there is strong demand locally if your property is priced sensibly. If you find that viewings are thin on the ground, then it’s almost certain that your asking price is too high. Don’t forget that estate agents only earn a fee if they sell your property. so they have all the motivation they need to bring buyers through the door.