Location Location Location – West/South Hampstead
In my last blog entry I wrote about property prices in the affluent areas of London, and why property prices are holding in the affluent areas. West Hampstead (this includes South Hampstead) is a unique area because it has three mainline stations, you have the Underground Jubilee Line Station, the Overground Station and the Thameslink, and these excellent transport links have made the area very popular with the city slickers. Being in zone two it has quick and easy access into the city. As an agent I used to describe to prospective buyers and renters that West Hampstead has a village type feel which is another attraction of the area, but now days I find it difficult to say this as in the past few years we have seen the likes of Tesco and Sainsbury move in so the local family businesses and boutiques are slowly vanishing.
You may or may not be surprised to learn that West Hampstead has the second highest number of estate agencies in London, a whopping 37 agencies, it was 40 at one point! As you walk down West End Lane, every other shop you will notice an estate agent. We used to have our own offices on West End Lane, until we received an offer which was difficult to refuse and we sold our premises to a restaurant and takeaway business. Along with estate agents, café’s, coffee shops and restaurants are also plentiful in West Hampstead.
My family had been in business in West Hampstead for more than thirty years and we have seen how the area has evolved. Due to the location, transport links and the character of the area it has been very popular with young affluent professionals. The lettings and sales market has always been buoyant in West/South Hampstead. Even during the tough times when prices have been falling elsewhere in the country, West Hampstead has managed to hold its own and buck the trend; such is the appeal of the area.
The prices in West/South Hampstead have been high for some time and the crash in 2008 did not seem to have much impact but I have seen signs in the last 6 months that the prices are correcting in the area. As the lending has become tighter and with the risk of redundancies, the high flying city slickers have become more cautious and are not prepared to splash out on properties like they used to. A few of months back I saw there was a two bedroom flat being marketed in South Hampstead for £749,950 (Leasehold) it had no buyers for several months and then in the end it sold at the end of last year for £649,950. That is a whopping 100k less than the asking price. This perhaps shows that the high prices people were prepared to pay to be located in West/South Hampstead might be fading slightly. You see it is all about valuing a property correctly, evaluate what the property has to offer and do not be afraid of putting in lower offers (by that I mean realistic low offers not absurd offers), what’s the worst that could happen it will be rejected. The important thing is to evaluate a property correctly so that you offer the right price; take into account the location, the size of the property (how much space are you getting for your money?), the quality of the property (is the property in good condition, consider if you will need to spend any money on the property), make comparisons with other properties in the area and have a look at past sold property prices in the area. Valuing a property is not dependant one thing alone, you have to weigh up and consider all the different factors.
I am not saying that the prices in West/South Hampstead are going to fall dramatically or you will be able to pick up bargains, but I do believe that the prices are going to be more realistic and you will have a better chance of paying market value prices now, as vendors who cannot sell their properties, are much more open to offers. Provided that you buy wisely, I think that you can never go wrong if you buy a property in West/South Hampstead. It has always had an excellent buy-to-let market, the rental incomes have always been consistently high and at present they are at an all-time high. For investors West/South Hampstead is still at the top of my recommended areas, it will never lose its appeal. The transport links are being improved, the Thameslink station has been vastly improved with a grand ticket office now on Iverson Road which has lift access, making it ready to handle the high volumes of commuters which will pass through West Hampstead during the Olympics. Both the West Hampstead Jubilee Line and Overground Line go to Stratford, so West Hampstead will be a thriving transport hub during the Olympics and savvy landlords would be wise to cash in on short-term holiday lets!
The Agency currently has two superb brand new flats for Sale in South Hampstead
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London House Prices – To Fall or Not To Fall? – That is The Question
When looking at prices around central London and the posh suburbs of greater London one would ask have prices really fallen? The prices outside of London have seen quite significant falls and even some of the less popular suburbs around London have seen prices drop quite substantially. However, when you look at current house prices in places like Kensington & Chelsea, Paddington, Maida Vale, St. Johns Wood, Hampstead, West Hampstead, Golders Green, Mill Hill, Stanmore, Totteridge & Whetstone, you would be forgiven for asking have prices really fallen? Although the prices have come down from the heights reached at the peak in 2007, you will find that most of the areas mentioned above have fared much better, many would say that these areas are recession proof. I should add at this point that the list of areas I have given is not an exhaustive one.
So what is it about these areas that the properties seem to be maintaining their value? Well most of the areas mentioned are very affluent and although I don’t entirely agree with what I am about to say next but you will find the ‘upper echelons of society reside in these areas.’ Many young professionals aspire to live in these areas, as it is not only about status but there are good schools, transport facilities and of course some good properties. There is also a more important reason why these areas have not seen significant falls and that is agents in these areas are still valuing properties in excess of what they should be and this is being fuelled by sellers insistence that their properties are in areas which are highly sought-after and therefore the properties should command a premium price. There is also a refusal by vendors to believe that prices have gone down in these affluent areas and they are still demanding prices in the region of 2007 levels (which was the peak of the property boom).
Agents Over-inflating Prices
Not only do some agents over-inflate prices so that they gain instructions, but in some cases you find that the agents are achieving values in excess of the asking price. Yes you have read correctly buyers have paid in excess of the asking price. I know you are all thinking why and how? Let me give you an example, recently I viewed a property in the affluent suburb of Stanmore, the property was a three bedroom house on the market for £425K, the property was in need of a substantial amount of work to put it in order, there was also a five bedroom house on the same road which did not require much work at all and that had been placed by the same agent on the market for £525K. Now we had estimated that the work involved in putting the first property in order would be in the region of £135K, hence we had determined the maximum we should pay for the property is £400K. We placed a cash offer with the agent for £395K and instantly the agent came back and said the vendors will not accept it. The truth was that the agent had not even put our offer to the vendor, he told us that they had already received offers close to the full asking price and that there was a lot of interest in the property due to the location. Although I did not believe a word the agent said we decided that we would offer the full asking price and play the game the agent was playing. So we placed our cash offer of £425K and what do you think the agent said, we already have an offer for £425K and now if you want to secure the property then your offer has to be in excess of this!!! See what we have to remember here is that the agent is playing the same game with any other prospective buyers, he keeps playing one off the other to see how high each buyer is willing to go. Anyway in the end we told the agent we do not want to enter a bidding war and the offer of £425K (the full asking price) is already more than generous and we would not be improving on it. About a week after we had placed the offer we received an email from the agent saying that the vendor had gone with a higher offer received. I came to learn through some other sources that the offer was for £450K, which is unbelievable due to the fact that the property required so much work and by the time it was completed the house would not be worth more than say £575K at the most. However, one should remember that getting an offer and having it accepted is one thing, it is a long way to exchange of contracts and completion. I have a feeling that the agent might come back in the future, asking ‘are you still interested in that property in Stanmore’.
These tactics used by agents do not help the market. Often buyers get carried away by their emotions and fail to recognise what actual property values are. I see time and again buyers fail to value properties correctly and hence pay over and above the odds. This failure has resulted in over-inflated prices in the affluent areas mentioned. Agents will always play games with you and test how far you are prepared to go with an offer for a property. Buyers need to wise up and start offering fair prices and not get sucked in by dubious tactics employed by many estate agents. Right now we are in a situation where buyers have the upper hand and they should use it to their advantage. If buyers stopped offering some of these crazy prices then naturally the prices would have to come down to more realistic levels in the affluent areas in and around London. If properties do not sell, then the vendors and their agents will be forced to bring asking prices down. Now this is a novel thought coming from someone who is an agent himself.
With UK property prices falling, is it the right time to buy?
Falling UK property prices
In the past few months we have seen both Halifax and Nationwide reporting that house prices have fallen, but there have also been occasions where they have contradicted each other, where one reports rising prices and other falling prices. The land registry figures also show conflicting evidence. With growing concerns over the economic outlook and public spending cuts weighing heavily on the minds of would-be purchasers, it is no wonder they are confused and unsure on whether they should wait or buy now. So the question is what is happening with house prices and where are they heading?
In my view house prices have been on a downward spiral since the back-end of 2008, although not all the figures and surveys released would agree with this. When the credit crisis erupted and reports began to come out about property prices falling, everyone refused to believe it, how can property prices fall? We have been riding a wave of ecstasy where we believed that property prices would just keep rising. The property prices have been over-inflated for some time now, the incompetent and greedy lending policies of banks and mortgage companies had fuelled the property price growth to a confounding level. People on earnings of 20K a year were obtaining mortgages 8-10 times their salaries, and it was this sort of incredulous behaviour which was creating a bubble waiting to burst. The underlying fact is that everything was being fuelled by greed, estate agents were also grossly over-valuing properties, because we all know the higher the price an agent sells a property at, the higher the commission they earn.
It was not until the credit crisis hit and the banks reigned in their lending policies that people realised that actually I cannot afford to buy a home at these super inflated prices. Many who found themselves out of a job suddenly learnt how difficult it was to repay the exorbitant mortgages they had taken on, which ignited a spate of repossessions. So why do I think prices are coming down and have come down? Well it comes down to affordability, we are taking reductions in our salary, unemployment is high and the banks do not want lend, all these factors point to a fall in house prices. If we want to see the property market moving again then prices will have to come down to a level where first time buyers can afford to buy again and get a mortgage. First time buyer participation is central to any sustained recovery in house prices and the property market as a whole.
Tightened Mortgage Lending
Mortgage lending has become so tight that it is fuelling the decrease in house prices. Since the banks tightened their lending, the common scenario has been: ‘Mike and Julie find a property that they like, the property is on the market at £350K they negotiate the price down so that vendor agrees to a purchase price of £325K, vendor and buyer are agreed and along comes the bank with its mortgage valuation, and it comes in at £300K. Bank says we will lend you 85% on our valuation but not on your agreed price. Mike and Julie need to make up a difference of £25K which they simply don’t have and the purchase falls through.’ I am sure there are many people who can relate to this situation as it has become so common, the mortgage valuations are all being down-valued because the lenders want you to put in as much equity as possible, this is another indication of why prices are and should be coming down. The stark reality for first time buyers is that if you do not have at least 30% to put down on a property, you will find it extremely difficult to get a mortgage.
So why are the lenders not lending? Well they are nervous about the state of the economy and the future direction of house prices, and some say their ability to fund their mortgage lending is constrained by the demands from the regulators to bolster their capital reserves. This means that only the best quality borrowers are being offered loans, and on much tighter criteria. The concern is that we are not clear out of the recession yet and there is a possibility of a double dip recession, it is this fear and uncertainty which is leading the banks to fill their coffers for rainy days. The banks will never be worse off and for some of them to report profits in the last year is absolutely confounding, when a year earlier they were all in trouble writing off billions!!!
Where are UK property prices heading?
Coming back to the direction of house prices, I feel in 2011 prices will continue to fall until we reach the middle of the year and then I expect they will become stagnant for the remainder of the year and not until the beginning of 2012 we will begin to see a rise again. With the Olympics in 2012 there will be an influx in UK tourism, which should help the British economy and generally the feeling will be more optimistic for 2012. You tend to find that when the public and the markets are both optimistic then generally the trend is for things to rise again. For those who want to own their own home, 2011 will be the right time to buy, but I would advise you keep your search on-going because if you find a property that you like then you can negotiate hard and get the price down. Do your research before you buy, speak to estate agents even though you have to take some of what they say with a pinch of salt, I tell you this being in the business myself, unfortunately some agents give the few honest ones a really bad name (after politicians, lawyers and bankers now, estate agents are probably the least trusted).
International Property
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The Agency is always interested in hearing from high quality developers looking to launch in the UK and generate a high level of pre-launch sales. Provided you meet a range of criteria expected by our discerning customers, we would be happy to discuss how we could work together and advise you on how you can best market your off-plan opportunities both in the UK and elsewhere.