There is no escaping the fact that over the last couple of
decades, the rise in the number buy to let properties in Southampton has been
nothing short of extraordinary. Many in
the “left leaning” press have spoken of a broken nation, the fact many
youngsters are unable to buy their first home with the rise of a new cohort of
younger renters, whom have been daubed ‘Generation Rent’ as landlords hoover up
all the properties for their buy to let property empires. Government has been
blamed in the past for giving landlords an unfair advantage with the tax
system. It is also true many of my fellow professionals have done nothing to
avail themselves in glory, with some suspect, if not on some rare occasions, downright
dubious practices.
Yet has the denigration and unfair criticism of some Southampton
landlords gone too far?
It was only a few weeks ago, I read an article in a
newspaper of one landlord who had decided to sell their modest buy to let portfolio
for a combination of reasons, one of which being the new tax rules on buy to
let that were introduced last year. The comments section of the newspaper and
the associated social media posts were pure hate, and certainly not deserved.
Like all aspects in life, there are always good (and bad)
landlords, just like there are good (and bad) letting agents ... and so it
should be said, there are good tenants and in equal measure bad tenants. Bad
letting agents and bad landlords should be routed out … but not at the expense
of the vast majority whom are good and decent.
But are the 9,872 Southampton portfolio buy to let landlords
at fault?
The Tories allowed people to buy their own Council house in
the 1980’s, taking them out of the collective pot of social rented houses for
future generations to rent them. Landlords have been vilified by many, as it has
been suggested by some they have an unhealthy and ravenous avarice to make cash
and profit at the expense of poor renters, unable to buy their first home. Yet,
looking beyond the headline grabbing press, this is in fact ‘fake news’. There
are seven reasons that have created the perfect storm for private renting to
explode in the 2000’s.
To start with, the Housing Acts of 1988 and 1996 gave buy to
let landlords the right to remove tenants after six months, without the need
for fault. The 1996 Act, and its changes, meant banks and building societies could
start to lend on buy to let properties, knowing if the mortgage payments
weren’t kept up to date, the property could be repossessed without the issue of
sitting tenants being in the property for many years (even decades!) ... meaning
in 1997, buy to let mortgages were born… and this, my blog reading friends, is
where the problem started.
Secondly, in the early 2000’s, those same building societies
and banks were relaxing their lending criteria, with self-certification (i.e. you did not need to prove your income),
mortgages 8 times their annual salary, and very helpful interest only mortgage deals
helped to keep repayments inexpensive.
Thirdly, the totally inadequate building of Council Houses (aka
Local Authority Housing) in the last two decades and (so I’m not accused of Tory bashing) - can you believe Labour only
built 6,510 Council Houses in the WHOLE OF THE UK between 1997 and 2010? Giving
the Tories their due, they have built 20,840 Council Houses since they came to
power in 2010 (although still woefully low when compared the number of Council
Houses built in the 1960’s and 1970’s when we were building on average 142,000
Council Houses per year nationally). This meant people who would have normally
rented from the Council, had no Council House to rent (because they had been
bought), so they rented privately.
And then 3rd, 4th, 5th, 6th
and 7th …
·
Less of private home building (again look at the
graph) over the last two decades.
·
A loss of conviction in personal pensions
meaning people were looking for a better place to invest their savings for
retirement.
·
Ultra-low interest rates for the last nine years
since the Credit Crunch meaning borrowing was cheap.
·
A massive increase in EU migration from 2004,
when we had eight Eastern European countries join the EU. That brought 1.4m
people to the UK for work from those countries – and they needed somewhere to
live.
Thus, we got the perfect storm conditions for an eruption in
the Southampton Private Rented Sector.
Commercially speaking, purchasing a Southampton property has
been undoubtedly the best thing anyone could have done with their hard-earned
savings since 1998, where property values in Southampton have risen by 269.56%...
…and basing it on the average rental in Southampton, earned £226,368
in rent.
Yet, the younger generation have lost out, as they are now incapable
of getting on to the property ladder(especially in Central London).
The Government have over the last few years started to
redress the imbalance, increasing taxes for landlords, together with the Banks
being tighter on their lending criteria meaning the heady days of the Noughties
are long gone for Southampton landlords. In the past 20 years, anything but
everything made money in property and it was easy as falling off a log to make
money in buy to let in Southampton – but not anymore.
Being a letting agent has evolved from being a glorified
rent collector to a trusted advisor giving specific portfolio strategy planning
on each landlord’s buy to let portfolios. I had a couple of instances recently with
a couple of portfolio landlords, one from Curdridge who
wanted income in retirement from his buy to let’s and the other from Chilworth,
who wanted to pass on a decent chunk of cash to his grandchildren to enable
them to buy their own home in 15/20 years’ time.
Both of these landlord’s portfolios were woefully going to
miss the targets and expectations both landlords had with their portfolios, so
over the last six/nine months, we have sold a few of their properties,
refinanced and purchased other types of Southampton property to enable them to
hit their future goals (because some properties in Southampton are better for
income and some are better for capital growth) ... And that my blog reading
friends is what ‘portfolio strategy
planning’ is!
If you think you need ‘portfolio strategy planning’, whether
you are a landlord of ours or not (because the Chilworth landlord wasn’t) ... drop me line or give the office a call.
Thank you for reading.
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.
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