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. 

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Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.

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