£110m a year black hole in the Southampton Property Market - Is Buy to Let Immoral? (Part 2)

 An Englishman’s Home is His Castle as Maggie Thatcher lauded - everyone should own their own home. In 1971, around 50% of people owned their own home and, as the baby-boomers got better jobs and pay, that proportion of homeowners rose to 69% by 2001. Homeownership was here to stay as many baby boomers assumed it’s very much a cultural thing here in Britain to own your own home.

But on the back of TV programmes like Homes Under the Hammer, these same baby boomers started to jump on the band wagon of Southampton buy to let properties as an investment. Southampton first time buyers were in competition with Southampton landlords to buy these smaller starter homes … pushing house prices up in the 2000’s (as mentioned in Part One) beyond the reach of first time buyers. Alas, it is not as simple as that. Many factors come into play, such as economics, the banks and government policy. But are Southampton landlords fanning the flames of the Southampton housing crisis bonfire?

I believe that the landlords of the 25,247 Southampton rental properties are not exploitive and are in fact, making many positive contributions to Southampton and the people of Southampton. Like I have said before, Southampton (and the rest of the UK) isn’t building enough properties to keep up the demand; with high birth rate, job mobility, growing population and longer life expectancy.

According to the Barker Review, for the UK to standstill and meet current demand, the country needs to be building 8.7 new households each and every year for every 1,000 households already built. Nationally, we are currently running at 5.07 per thousand and in the early part of this decade were running at 4.1 to 4.3 per thousand.

It doesn’t sound a lot of difference, so let us look at what this means for Southampton …

For Southampton to meet its obligation on the building of new homes, Southampton would need to build 917 households each year. Yet, we are missing that figure by around 382 households a year.

For the Government to buy the land and build those additional 382 households, it would need to spend £110,571,916 a year in Southampton alone. Add up all the additional households required over the whole of the UK and the Government would need to spend £23.31bn each year … the Country hasn’t got that sort of money!

With these problems, it is the property developers who are buying the old run-down houses and office blocks which are deemed uninhabitable by the local authority, and turning them into new attractive homes to either be rented privately to Southampton families or Southampton people who need council housing because the local authority hasn’t got enough properties to go around.

The bottom line is that, as the population grows, there aren’t enough properties being built for everyone to have a roof over their head. Rogue landlords need to be put out of business, whilst tenants should expect a more regulated rental market, with greater security for tenants, where they can rely on good landlords providing them high standards from their safe and modernised home. As in Europe, where most people rent rather than buy, it doesn’t matter who owns the house – all people want is a clean, decent roof over their head at a reasonable rent.

So only you, the reader, can decide if buy to let is immoral, but first let me ask this question - if the private buy to let landlords had not taken up the slack and provided a roof over these people’s heads over the last decade .. where would these tenants be living now? ….. because the alternative doesn’t even bear thinking about!

If you are a landlord or thinking of becoming one for the first time and you want to read more articles like this about the Southampton Property Market, together with regular postings on what I consider the best buy to let deals in Southampton (out of the many of properties on the market, irrespective of which agent is selling it) then feel free to get in touch.

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@belvoirlettings.com or call on 023 8001 8222.

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