Southampton Rents To Rise Quicker Than Southampton Property Prices In Next 5 Years

The next five years will see an interesting change in the Southampton property market. My recent research has concluded that the rent private tenants pay in Southampton will rise faster than Southampton property prices over the next five years, creating further issues to Southampton’s growing multitude of renters. In fact, my examination of statistics forecasts that ..

By 2022, Southampton rents will increase by 23%, whereas Southampton property values will only grow by 17%.

Let me explain why I have come to those conclusions:

Over the last five years, property values in Southampton have risen by 31.6%, whilst rents have only risen by 16.3%.

Throughout the last few years, and compounded in 2016, tenant demand for rental properties continued to go up whilst the Press predicted some landlords expect to reduce their portfolios in the next couple of years, meaning Southampton tenants will have fewer properties to choose from, which will push rents higher. In fact, talking to fellow property professionals in Southampton, there appears to be privation and shortage of new rental properties coming on to the Southampton lettings market.

Landlords have some intriguing challenges ahead of them in the coming years most notably in that the Tory’s have changed the taxation rules for landlords in the way buy to let properties are to be taxed. On top of that, there is the ban on letting agent fees which is still to come into force (probably in 2018). When that happened in Scotland in 2012, Scottish letting agents passed on those fees to their landlords, who in turn increased the rent they charged to their tenants.

All I would say to Theresa May and Philip Hammond is that they must be wary about indicating both red and green lights at the same time to the private rented sector. They can’t expect the armies of small private landlords to continue to house around a fifth of the population and then tax the hell out of them. They didn’t invest in buy to let as a charity or to satisfy any philanthropic urges. Something has to give – and that will be significant rent rises over the coming few years (and before anyone gives me any derogatory comments about landlords … if it wasn’t for landlords buying all these buy to let properties over the last 15 years, I am not sure where everyone would be living today – because most the Council houses were sold off in the 1980’s!).

With the challenges ahead, with the ‘B’ word (that’s budget if you wondered!), house price inflation will be tempered over the coming five years in Southampton. As I have discussed in previous articles, the number of properties on the market in Southampton remains close to historic lows, which is both good as it keeps houses prices relatively stable, yet not so good as it impedes choice for buyers… and hence why I believe property values in Southampton will only be 17% higher in five years’ time.

Whilst on the other side of the coin, with the challenges facing landlords and the significant shortage of new homes being built, Southampton people still need somewhere to live. If those people aren’t buying houses and the local authority aren’t building council houses in there thousands (because they have no money), with the average rent for a Southampton rental property currently standing at £1,076 per month …

Over the next five years, I predict the average rent

in Southampton will rise to £1,323 per month

These are interesting times. There is still money to be made in buy to let in Southampton – Southampton landlords will just need to be smarter and more savvy with their investments. If you are looking for such advice and opinion to help you meet those investment goals, one place you can find more information is the Southampton Property Blog

If you are an existing landlord or someone thinking of become a first-time landlord looking for advice and opinion and what (or what not to buy in Southampton), one source of information is the Southampton Property Blog 

If you are looking for an agent that is well established, professional andcommunicative, 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.

Don't forget to visit the links below to view back dated deals and Southampton Property News.

Blog, http://southamptonproperty.blogspot.co.uk/

Facebook, https://www.facebook.com/belvoirlettingssouthampton/

Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan

Website, https://www.belvoir.co.uk/letting-agents-southampton 

Southampton rents rise by 22.6% since 2005

The Southampton Property Market is a very interesting animal and has been particularly fascinating over the last 12 years when we consider what has happened to Southampton rents and house prices.

There’s currently much talk of what will happen to the rental market following Brexit. To judge that, I believe we must look at what happened in the 2008/9 credit crunch (and what has happened since) to judge rationally and methodically, the possible ramifications for long-term investors in the Southampton property market. You see, an important, yet overlooked measure is the performance of rental income vs house prices (i.e. the resultant yields over time). In Southampton (as for the rest of Great Britain), notwithstanding a slight drop in 2008 and 2009, property rentals have been gradually increasing.

The income from rentals has been progressively increasing over the last 12 years. Today, they are 22.6% higher than they were at the beginning of 2005. In fact, over the last five years, the average growth has been 2.4% per annum. From a landlord’s point of view, increase in average rental income is not to be sneered at. However, the observant readers will be noting that we are ignoring an important factor – our friend inflation.

Turn the clock back to 2005, and we have a property being rented for say £900 a month and that is still being rented at £900 a month today, in Spring of 2017. While the landlord is not getting any less income, this £900 is no longer worth as much. Let me explain, in 2005, £900 may have bought a two-week 4* holiday in Italy. Yet, holidays have increased in line with inflation (which has been 38.5% since 2005), so our holiday would cost today £1,246 (£900 + 38.5% inflation = £1,246). Therefore, the landlord could no longer afford the same holiday, even though they have the same amount in pound notes from their rental property.

This means when we compare rents in Southampton to inflation since 2005, Southampton landlords are worse off today, when they receive their monthly rental income, than they were in 2005 by 15.9% in real terms (rents increased by 22.6% since 2005, less the 38.5% inflation since 2005 – net affect 15.9% drop) 

However, rental income is not the only way to generate money from property as property values can increase. Although in the short term, cash flows are diminishing, many Southampton landlords may be content to accept that for a colossal increase in capital value.

Property values in Southampton have risen by 35.2% since 2005

This equates to a reasonably salubrious 2.94% per annum increase over the last 12 years. Even more interesting that this includes the 2008/9 property crash, this will make those Southampton landlords and investors feel a little better about the information regarding rents after inflation.

Moving forward, the prospects of making easy money on buy to let in Southampton have diminished, when compared to 2005. Last decade, making money from buy to let was as easy as falling off a log – but not anymore.

It would be true to say, my rental income verses property prices study does lead to noteworthy thoughts. I am often asked to look at my landlord’s rental portfolios, to ascertain the spread of their investment across their multiple properties. It’s all about judging whether what you have will meet your investment goals in the future. It’s the balance of capital growth and yield whilst diversifying this risk.

If you are investing in the Southampton property market, do your homework and do it well. While some yields may look attractive, there are properties in many areas that do not have the solid rudiments in place to sustain them. If you are looking for capital growth, you might be surprised where the hidden gems really are. Take advice, even ask your agent for a portfolio analysis like I offer my landlords. The clear majority of agents in Southampton will be able to give a detailed analysis of past and anticipated investment opportunity (especially the awful effect of inflation) on your portfolio. However, if they can’t help – well, you know where I am, the kettle is on!

For more thoughts on the Southampton Property market – visit the Southampton Property Blog

If you are an existing landlord or someone thinking of become a first-time landlord looking for advice and opinion and what (or what not to buy in Southampton), one source of information is the Southampton Property Blog 

If you are looking for an agent that is well established, professional andcommunicative, 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.

Don't forget to visit the links below to view back dated deals and Southampton Property News.

Blog, http://southamptonproperty.blogspot.co.uk/

Facebook, https://www.facebook.com/belvoirlettingssouthampton/

Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan

Website, https://www.belvoir.co.uk/letting-agents-southampton

1,294 Properties For Sale in Southampton ... is this a good time to sell?

2017 has started with some positive interest in the Southampton property market.  Taking a snap shot of the Southampton property market for the first quarter of 2017, the picture suggests some interesting trends when it comes to the number of properties available to buy, their asking prices and what prices properties are actually selling for.

Let us first consider the number of properties for sale, compared to 12 months ago:

Type of Southampton Property	Number of Properties on the Market 12 months ago	Number of Properties on the Market now	% change
Detached	220	274	+25%
Semi	202	313	+55%
Terraced	98	136	+39%
Flat	460	490	+7%

So when we add in building plots and other types of properties that don’t fit into the four main categories, that means there are 1,294 properties for sale today compared with 1,061 a year ago, a rise of 22%.

Next, Southampton asking prices, compared

to the same as a year ago, are 8% higher.

With that in mind, I wanted to look at what property was actually selling for in Southampton. Taking my information from the Land Registry, the last available six months property transactions for SO16 show an interesting picture (note the Land Registry data is always a few months behind due to the nature of the house buying process and so November 2016 is latest set of data). The price shown is the average price paid and the number in brackets is the number of properties actually sold.

	Jun-16	Jul-16	Aug-16	Sep-16	Oct-16	Nov-16
Detached	£483,000 (17)	£483,833 (15)	£476,289 (19)	£381,847 (12)	£407,089 (14)	£405,500 (9)
Semi Detached	£239,797 (15)	£235,477 (24)	£234,438 (21)	£249,179 (14)	£252,046 (13)	£256,682 (11)
Terraced	£182,839 (22)	£184,836 (21)	£204,978 (23)	£195,440 (25)	£208,500 (13)	£195,400 (20)
Flat	£185,636 (18)	£153,345 (19)	£188,111 (19)	£204,775 (16)	£135,650 (10)	£146,983 (18)
All	£266,275 (72)	£249,418 (79)	£271,479 (82)	£242,284 (67)	£260,856 (50)	£224,598 (58)

So what does all this mean for the property owning folk of Southampton?

Well, with more property on the market than a year ago and asking prices 8% higher, those trying to sell their property need to be mindful that buyers, be they first timers, buy to let landlords or people moving up the Southampton property ladder, have much more price information about the Southampton property market at their fingertips than ever before.

Those Southampton people who are looking to sell their property in 2017, need to be aware of the risks of over pricing their property when initially placing it on the market. Over the last 12 months, I have noticed the approach of a few Southampton estate agents is to suggest an inflated asking price to encourage the homeowner and secure the property to sell on their books. The down side to this is that when offered to the market for the first time, buyers will realise it is overpriced and wont waste their time asking for a brochure. They won’t even view the property, let alone make an offer. So when the price is reduced a few months later, the property has become market stale and continues to be ignored.

Whilst the Southampton property-market has an unassailable demand for property – there is one saying that always rings true - as long as the property is being marketed at the right price it will sell.

If you want to know if your Southampton property is being marketed at the right price, send me a web link and I will give you my honest opinion.

If you are looking for an agent that is well established, professional andcommunicative, 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.

Don't forget to visit the links below to view back dated deals and Southampton Property News.

Blog, http://southamptonproperty.blogspot.co.uk/

Facebook, https://www.facebook.com/belvoirlettingssouthampton/

Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan

Website, https://www.belvoir.co.uk/letting-agents-southampton

Southampton’s housing affordability hits a ratio of 6.77 to 1

A Southampton homeowner emailed me last week, following my article posted in the Southampton Property Blog about the change in attitude to renting by the youngsters of Southampton and how they thought it was too expensive for first time buyers to buy in Southampton.  There can be no doubt that buy to let landlords have played their part in driving up property values in Southampton (and the UK) and from that made housing a lot less affordable for the 20 and 30 somethings of Southampton.

In the email, they said they thought the plight of the first-time buyers in Southampton was like a novice tennis player, playing tennis with Andy Murray. If you played him once you will unquestionably lose and if you were to play him 100 times you would lose 100 times. That is what they thought it was like for all the 20 something’s first time buyers of Southampton going against all the buy to let landlords.

They went on and asked if the Bank of England (BoE) should be tasked to control house price inflation in the same way as the BoE controls inflation.  The BoE has a target for the annual inflation rate of the Consumer Prices Index of 2%, whilst it is also required to support the Government’s economic policy, including its objectives for growth and employment.  So, should BoE be charged with containing buy to let housing market, by possibly changing the rules on the loan-to-value (LTV) ratio’s?

So, let’s look at how affordable Southampton is?  The best measure of the affordability of housing is the ratio of Southampton Property Prices to Southampton Average Wages, (the higher the ratio, the less affordable properties are).   (i.e. looking at the table below, for example in 2014, the average value of a Southampton property was 5.95 times higher than the average annual wage in Southampton).

	1998		2000	2002		2004		2006		2008		2010		2012		2014		2016 (EST)
	3.25		3.88	4.86		6.28		6.32		6.02		6.15		5.81		5.95		6.77

This deterioration in affordability of property in Southampton over the last couple of years has been one of the reasons why the younger generation is deciding more and more to rent instead of buy their own house. 

... but it’s not the only reason.

A quick look on Money Supermarket today found 169 lenders prepared to offer 75% LTV Buy to let Mortgages and none at 85% LTV.  Lenders have self-imposed a high level of entry for buy to let landlords (i.e. putting down at least 25% of the purchase price in cash).  The BoE don’t need to meddle there!  Also, the Tories have certainly done lots to level the playing field in favour of first time buyers.  For nearly a year now, Landlords have had to pay an additional 3% in stamp duty on any buy to let purchase and over the coming four years, tax rules on landlord’s claiming mortgage interest relief will affect their pocket.  Neither, it doesn’t help that the local Authority sold off council houses in the Thatcher years and so for many on low incomes or with little capital, owning a home has simply never been an option (today or in the past).  

It’s easy to look at the headlines and blame landlords.  First time buyers have been able to access 95% LTV mortgages since 2010, meaning even today, a first-time buyer could purchase a 1 bed apartment in Southampton for around £120,000 and only need to find £6,000 deposit.  Yes, a lot of money, but first time buyers need to decide what is important to them.  Either save up for a couple of years to save the deposit and go without two annual foreign holidays, the full Satellite or Cable TV package with Sports and Movies costing three figures a month, the latest mobile phone and out socialising ... or not as the case maybe?

I think we as a Country have changed ... renting is returning to be the norm.  So my opinion is, landlords have it tough.  Let’s not blame them for the ‘perceived’ woes of the nation ... because to be frank … we haven’t always been a country of homeowners.  Roll the clock back to 1964, and nationally, 30% of people rented their home from a private landlord – today – its only 15.3% nationally.

If you are an existing landlord or someone thinking of become a first-time landlord looking for advice and opinion and what (or what not to buy in Southampton), one source of information is the Southampton Property Blog 

If you are looking for an agent that is well established, professional andcommunicative, 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.

Don't forget to visit the links below to view back dated deals and Southampton Property News.

Blog, http://southamptonproperty.blogspot.co.uk/

Facebook, https://www.facebook.com/belvoirlettingssouthampton/

Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan

Website, https://www.belvoir.co.uk/letting-agents-southampton