If you have been reading
my articles on the Southampton property market recently, you will see that in
the three years since the referendum of the ‘B’ word (that word is banned in
our household), we have proved beyond doubt that it (whose name shall remain
nameless) has had no effect on the Southampton property market (or the UK as a
whole).
So one might ask, what does affect the property market locally?
Well many things on the demand side include wages, job security, interest
rates, availability of mortgages, confidence in the economy, inflation,
speculative demand ... the list goes on. Yet as my blog readers will note, I
like to delve deeper into the numbers and I have found an interesting
correlation between unemployment and the number of properties sold (i.e. transactions).
Why transaction levels and
not house prices? Well just looking at Southampton house prices as a bellwether
has flaws. Many property market commentators
and economists believe transaction numbers (the number of properties sold) give
a more accurate and candid indicator of the health of the property market than
just house values alone. The
reason is twofold. First most people when they sell also buy, so if property
values have dropped by 10% or risen by 10% on the one you are selling, it would
have done the same on the one you are buying - meaning to judge the health of a
property market is very one dimensional. Secondly, the act of moving is very
much a human thing. Property
habitually conveys a robust emotional connection with homeowners - a connection
that few would attribute to their other investments like their savings or stock
market investments. Moving home could be described as a human enterprise,
moving from one chapter of one’s life to another. When people move home, it
shows they are moving forward in their lives and so this gives a great
indicator of the health of the property market.
Looking at Southampton’s
figures on the graph, you can see an inverse relationship between unemployment
and housing transaction levels.
Property transactions in Southampton dropped by 52.64%,
whilst unemployment in Southampton rose by 33.2% during the 2007 to 2009 Global
Financial Crash
There is clearly a
relationship between conditions in the Southampton job market and the number of
people who move home ... interesting don’t you think?
Now I am not saying unemployment is the only
factor influencing the Southampton property - but it has to be said there is a
link.
As a country
(and indeed here in Southampton) over the last 40 years, we have seen a shift
in the outlook over the purpose of housing and the development of the religion
of following house prices (and I appreciate the irony of me writing these
articles on Southampton - feeding that habit!) Yet, when did owning a home turn
from buying a roof over your head to an out and out investment vehicle? I do
wish people would stop fretting about their intrinsic value being associated
with their Southampton home. Now of
course, I am not dismissing the current levels of Southampton house prices - we
just have to take into consideration other metrics alongside them when judging
the health of the property market locally.
One final thought, looking
on a broader scale in the UK, those towns and cities whose property markets
bounced back after the Global Financial Crash had high levels of employment and
low unemployment whilst places with high unemployment and relatively low
employment have, on the other hand, typically underperformed.
So the next time you are
considering a house move or buying a buy to let property in Southampton ...
don’t make your judgement on house price growth alone.
If you would like to pick my brains on the Southampton Property Market – pop in for a coffee or drop me a line on social media or email.
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@belvoir.co.uk or call on 023 8001 8222.
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