£714.02pm – The Profit made by every Southampton Property Owner over the last 20 years

As we go headlong into 2018, I believe UK interest rates will stay low, even with the additional 0.25% increase that is expected in May or June. That rise will add just over £20 to the typical £160,000 tracker mortgage, although with 57.1% of all borrowers on fixed rates, it will probably go undetected by most buy-to-let landlords and homeowners. I forecast that we won’t see any more interest rate rises due to the fragile nature of the British economy and the Brexit challenge. Even though mortgages will remain inexpensive, with retail price inflation outstripping salary rises, it will still very much feel like a heavy weight to some Southampton households.

Now it’s certain the Southampton housing market in 2017 was a little more subdued than 2016 and that will continue into 2018. Property ownership is a medium to long-term investment so looking at that long-term time frame; the average Southampton homeowner who bought their property 20 years ago has seen its value rise by more than 260%.

This is important, as house prices are a national obsession and tied into the health of the UK economy as a whole. The majority of that historic gain in Southampton property values has come from property market growth, although some of that will have been added by homeowners modernising, extending or developing their Southampton home.

Taking a look at the different property types in Southampton and the profit made by each type, it makes interesting reading..

	Average Price Paid in 1998 in Southampton	Average Price Paid in 2018 in Southampton	Average Total Profit in last 20 years in Southampton	Average Profit per Month in Southampton over the last 20 years
Detached	£115,675	£349,874	£234,199	£975.83
Semi	£66,220	£258,888	£192,668	£802.78
Terraced	£57,342	£224,500	£167,158	£696.49
Apartments	£46,849	£160,760	£113,911	£474.63
Overall Southampton Average	£66,130	£237,495	£171,365	£714.02

However, I want to put aside all that historic growth and profit and looking forward to what will happen in the future. I want to look at the factors that could affect future Southampton (and the Country’s) house price growth/profit; one important factor has to be the building of new homes both locally and in the country as a whole. This has picked up in 2017 with 217,350 homes coming on to the UK housing ladder in the last year (a 15% increase on the previous year’s figures of 189,690. However, Philip Hammond has set a target of 300,000 a year, so still plenty to go!

Another factor that will affect property prices is my prediction that the balance of power between Southampton buy-to-let landlords and Southampton first-time buyers should tip more towards the local first-time buyers in 2018.

The Council of Mortgage Lenders expects the number of buy to let mortgages to drop by 34% from levels seen in 2015. This is because of taxes being increased recently on buy-to-let and harder lending criteria for buy to let mortgages, which means I foresee a gradual move in the balance of power in favour of first-time buyers rather than buy-to-let landlords. First time buyers will also be helped by The Chancellor eradicating Stamp Duty for all properties up to £300,000 bought by first-time buyers in the recent budget.

This means Southampton buy-to-let landlords will have to work smarter in the future to continue to make decent returns (profits) from their Southampton buy-to-let investment. Even with the tempering of house price inflation in Southampton in 2017, most Southampton buy to let landlords (and homeowners) are still sitting on a copious amount of growth from previous years.

The question is, how do you, as a Southampton buy to let landlord ensure that continues?

Since the 1990’s, making money from investing in buy-to-let property was as easy as falling off a log. Looking forward though, with all the changes in the tax regime and balance of power, making those similar levels of return in the future won’t be as easy. Over the last ten years, I have seen the role of the forward thinking letting agents evolve from a ‘rent collector’ and basic property management to a more holistic role, or as I call it, ‘landlord portfolio strategic leadership’. Thankfully, along with myself, there are a handful of letting agents in Southampton whom I would consider exemplary at this landlord portfolio strategy where they can give you a balanced structured overview of your short, medium and long-term goals, in relation to your required return on investment, yield and capital growth requirements. If you would like such advice, speak with your current agent – or whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line.

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/

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

With Southampton annual property values 4.4% higher, here is my 2018 forecast…

Looking at the newspapers between Christmas and New Year, it seemed that this year’s sport in the column inches was to predict the future of the British housing market. So following the same theme, here are my thoughts on the Southampton property market.

With the average 5-year fixed rate mortgage at 1.98% (down from 3.47% in 2014) and 2-year fixed rate at 1.47% (down from 2.37% in 2014), mortgage interest rates offered by lenders are at an all-time low, and that’s even with the slight increase on the Bank of England base rate a few months ago. Added to this, there has been a low unemployment rate of 4.7% in Southampton, which has contributed to maintaining a decent level of demand for property in Southampton in 2017. Interestingly, an impressive 5,328 Southampton properties were sold in last 12 months, whilst finally, the number of properties for sale in the city has remained limited, thus providing support for Southampton house prices, meaning…

Southampton property values are 4.4% higher than a year ago

However, as continue into 2018, there will be greater pressures on people’s incomes, as inflation starts to eat into real wage packet growth, which will in turn wield a snowballing strain on consumer confidence. Interestingly though, information from the website ‘Rightmove’ suggests that over a third of the properties it had on its books in October and November had their asking prices reduced - the highest percentage of asking price reductions in the same time frame[CA1] , for over five years. Still, a lot of that could have been house-sellers being overly optimistic with their initial pricing.

In terms of what will happen to Southampton property values in the next 12 months, a lot will be dependent upon the type of Brexit we have and the impact on the whole of the UK economy. A lot of people will talk about the Central London property market in the coming year, and if the banking and finance sectors are negatively affected with a poor Brexit deal, then the London market is likely to see more of an impact.

Nevertheless, Southampton homeowners and Southampton Landlords should be aware of what happens in the rollercoaster housing market of Central London, but not panic if prices there drop suddenly during 2018. Over the last 8 years the Central London property market has been in a world of its own (Central London house prices have grown by 89.6%, whilst in Southampton, they have only risen by 36.4%). So we might see a heavy correction in the Capital, whilst more locally, something a little more subdued.  

Hindsight is always easier than foresight and predicting anything economic is all well and good when you know what is around the corner. At least we have the Brexit divorce settlement sorted and, as the UK economy and the UK housing market are intertwined, it all depends on how the country deals with the Brexit issue. Having been through the global financial crisis and come out reasonably intact, I am sure we can get through this together as well!

Oh, and house prices in Southampton over the next 12 months? I believe they will end up between 0.2% and 1.5% higher, although it will probably be a bumpy ride to get to those sorts of figures.

If you would like to read more articles on my thoughts on the Southampton property Market – please visit the Southampton Property Market 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  

My thoughts on the future of the Southampton buy-to-let market

I was recently reading a report by the ‘Home’ website which suggested that hordes of Landlords are selling their buy-to-let investments due to increasing burdens placed on them within in the buy-to-let market. Their findings suggested that the number of new properties that came onto the UK market, for sale, jumped by 11% as a result.

Increasing burdens include new tax rules coming in over the next 3 to 4 years. In a bid to heighten standards in the private rental sector Westminster has also announced that all self-managing Landlords (i.e. Landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve tenant arguments and disputes.

Interestingly, I was chatting with a self-managed Landlord from Chilworth when I was out socially over the festive period. He wasn’t aware of other recent legislation that has hit the private rental sector, including the ‘Right to Rent’ regulations which came into operation last year. Landlords have to certify that their tenants have the legal right to live in the UK. This includes checking, and taking copies of, their tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you, as they will with the redress scheme when it is implemented.

If you are a self-managed Landlord the consequences for non-compliance are severe; if you let a property to a tenant who is living in the UK illegally, you will be fined up to £3,000! That same Chilworth Landlord popped into my offices in the New Year, and I checked all his paperwork to ensure that he is on the right side of the law going forward. I offer the same to any Landlord in the Southampton area – if you want me to cast my eye over your buy-to-let matters there will be no charge – just bring in some chocolates for the office team!

But what of all these extra properties being dumped onto the market in Southampton? When I looked at the records the number of properties on the market in now, as opposed to a year ago, tells an interesting story…

	1st Jan 2017	1st Jan 2018
Detached	286	329	15%
Semi	240	264	10%
Terraced	118	146	24%
Flat	512	548	7%
Plots + Other	82	67	-18%
Total	1238	1354	9%

  

Overall, Southampton does match the national trend, with the number of properties on the market actually rising by 9% in the last year.  It was particularly interesting to see the number of terraced properties increase by 24%, yet the number of flats rise by just 7%.

However, speaking with my team and other property professionals in the city, the majority of that movement in the number of properties, and the types of properties on the market, isn’t down to Landlords dumping their properties onto the market. The whole property market has changed in the last 12 months, with the majority due to the owner-occupier market rather than Landlords - a subject I will write about soon in my Southampton Property Market blog. You see, for the last ten years, each month there has always been a small number of Southampton Landlords who have been releasing their monies from their Southampton buy-to-let properties, as is the nature of all investments!

Nationally, the number of rental properties coming onto the market to rent fell by 16% in Q4 2017 compared to Q4 2016. But that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties for longer, in turn causing less properties to be put onto the market for RE-LET.

Nevertheless, some Southampton Landlords will want to release the equity held in their Southampton buy-to -let properties in 2018. All I suggest is that you speak with your letting agent first - putting a rental property on the open market often spooks the tenants to hand in their notice days after you put the property on the market because they don’t like the uncertainty and also believe they will become homeless! The result of this is that you could end up with an empty property, costing you money with no rental income.  However, some letting agents who specialise in portfolio management have select lists of Landlords that will buy with sitting tenants in. If you have a portfolio in the Southampton area and are considering selling some or all of your properties – drop me a line as I might have a portfolio Landlord for you, allowing you peace of mind that you won’t experience any rental voids. 

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  

Youngsters unable to buy their first home in Southampton – are the Baby Boomers and Landlords to blame?

Talk to many Southampton 20-somethings, where home ownership has looked but a vague dream, and they’ll feel vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life; jealous of their free university education with grants, their eye-watering property windfalls, their golden final salary pensions and their free bus passes…

If you had bought a property in Southampton for say £17,000 in the first quarter of 1977, today it would be worth £373,612 - a windfall increase of 2097.7%!

But to blame the 60 and 70 year olds of Southampton for that sort of rise seems a little unfair. With the value of the homes rising like a rocket, I don't believe they can be censured or made liable for that. In my blog a few weeks ago, I discussed the number of people in the Southampton area who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members of Southampton society, rattling around in large 4/5 bed houses where the kids have flown the nest years ago. But should they be blamed?

We are all human, and the mature members of UK society have just reacted to the inducements of our property and tax system. Those who joined the property market party in the 1970’s and 1980’s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.

And neither do I directly blame the multitude of Southampton buy-to-let Landlords, purchasing their 10th or 11th property to add to their empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.

So, who is to blame?

Well, hyperinflation in the 1970s meant the real value of people’s mortgages were wiped out (as mentioned above). Margaret Thatcher and Nigel Lawson could also shoulder the blame with Maggie selling off millions of council houses and Nigel Lawson’s delayed ending of the MIRAS tax relief in 1987. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precludes a more efficient distribution of the current housing stock. The Government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Southampton house movers to downsize.

However, I have started to see over the last few years a change in Government policy towards housing. The new breed of Southampton buy-to-let Landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules. These new rules make it slightly more difficult to profit from property unless you have all the national information and Southampton property trends to hand.

It’s easy to think the only reason that hundreds of first-time buyers have been priced out of the Southampton housing market is because of Landlords. Yet, I believe Landlords have been unappreciated for the Southampton homes they provide for Southampton people. With first-time buyers struggling to save for a deposit, if it weren’t for Landlords buying up homes over the last 10-15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes - homes that were provided to Southampton by buy-to-let Landlords.

  

One side of the argument is that 1,026 homes are being bought by buy-to-let Landlords each year in the Southampton City Council area which might otherwise have become available to other buyers. The other side of the argument is that the current national average deposit is £51,800, which is, by far, the greatest barrier to those wanting to buy their first home. Those homes bought by local buy-to-let Landlords are not left idle, as they equate to 7,179 of new homes for local people, most of whom see renting as a better option because of the choice, simplicity and flexibility which renting brings.

In the 60s, 70s and 80s, the traditional thoughts that you were a failure unless you owned your own home have now all but disappeared, because if you ask many young people, they would probably say renting was the perfect option for them at certain times of their life. 

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