Looking back at the 75th
Anniversary of the D-Day landing a few months ago, it reminded me of the huge
changes that have happened to Southampton and more specifically the Southampton
property market since WW2. Back in 1946, the average wage in Southampton was
just over £5 a week and to buy an average car would cost you just under £600,
yet this is a property blog, so...
The average value of a Southampton property in 1946 was £1,217
In fact, in those 75 years, the average Southampton
house had doubled in price by 1961, then again in 1971, 1975, 1980, 1988, 2000
and 2006. Now a lot of those increases (especially in the 1970’s) were caused
by hyperinflation, yet since the start of the 21st Century inflation
has been kept low and since the Credit Crunch (2008/9), whilst property values
have been rising, they haven’t been at the rates experienced in the latter half
of the 20th Century.
Now what a property sells for is irrelevant,
its whether someone can afford it.
Increases in Southampton property values have
produced huge increases in equity for many Southampton homeowners and Southampton
buy to let landlords, yet on the other side of the coin also making housing
unaffordable for other people. The best measure of the affordability of housing
is the ratio of Southampton property values to Southampton average earnings (i.e.
salary/wages). The ratio works on the basis the higher the ratio, the less
affordable properties are.
In 1997, the average value of a Southampton
property was 3 times higher than the average annual wage in Southampton, in
2007 it peaked at 6.4, yet two years later it had dropped to 5.4 and since then
has slowly risen to 7.7 times higher!
It can be seen that even though property in Southampton
became more affordable after the 2007/8 property crash (i.e. the ratio
dropped), in subsequent years, with house values rising but earnings/salaries
not keeping up, the ratio started to rise. This has meant there has been a
decline in affordability of property in Southampton over the last five years -
so for those on particularly low incomes or with little capital, it
unfortunately means that buying a Southampton home will never become an option.
Therefore, the demand for private rented
properties in Southampton will continue to grow as many young Southampton
people are deciding to rent instead of buy their own house (knowing when their
parents pass away, the equity built up in their parents property will be passed
down - and then they can buy in their 50’s and 60’s - just like it happens in
Germany).
Yet,
that is many decades away and with fewer Southampton people wanting or able to
save up the 5% deposit required by mortgage lenders, more and more people are
looking to rent. Tie this in with the subtle shift in attitudes towards renting
since the Millennium and less people jumping the on the bottom rung of the property
ladder, this has driven rents and demand up in Southampton over the last few
years. Yet (and it’s an important proviso) the type, location and demands of Southampton
tenants has changed over that same time frame meaning you can’t just make money
from buy to let as easily as falling off a log like you did in the early 2000’s.
If you would like to pick my brains on the Southampton Property Market – pop in for a coffee or drop me a line on social media or email.
If you are looking for an agent that is well established, professional and communicative, then contact us to find out how we can get the best out of your investment property.
Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.
Don't forget to visit the links below to view back dated deals and Southampton Property News.
Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan
LinkedIn, https://www.linkedin.com/in/brianlinehan
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