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Thursday 26 November 2020

Each Southampton Landlord Could be Hit by a £34,951 Bill!!

    CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

… and the 5 ways on how all Southampton landlords can escape the worst of the coronavirus downturn on their Southampton rental property.

 

With the second lockdown starting on the 5th November 2020, does this mean Southampton landlords can wave goodbye to their Southampton buy-to-let investment and see it go up in smoke on the bonfire of buy-to-let dreams, like a Guy Fawkes puppet?

 

With many Southampton tenants at risk of losing their jobs after the furlough scheme ends in March and as the reverberations of the coronavirus recession hit this winter, what does this all mean for Southampton landlords and what can they do to mitigate the risks?

 

Since the spring, most Southampton tenants and buy-to-let landlords have been protected from the coronavirus crisis thanks to the banks with their mortgage payment holidays and job support schemes.

 

Before the second lockdown was announced on the 31st October, it was expected that as the furlough and mortgage payment holidays were due to end on Halloween, there would be some serious fallout from those schemes finishing. One silver lining from the lockdown (if you can call it that) is that mortgage payment holidays and furlough have been extended, yet does all that just kick the can down the road?

 

The question is, what can Southampton landlords do to mitigate the financial risk on their Southampton buy-to-let investment?

 

1.      Help Your Southampton Tenants get the Financial Support They are Entitled To

Billions of pounds are being spent by the Government to help those people whose income has been hit by coronavirus. The better Southampton letting agents and self-managing landlords are supporting, guiding and helping those Southampton tenants in financial difficulty to gain a better understanding of the Universal Credit (UC) processes, systems and payment levels, to enable their tenants to pay the rent and ultimately indirectly help their Southampton landlord. Also, if you are a Southampton tenant, and that support isn’t given when you ask, don’t forget Southampton City Council do hold special cash reserves for discretionary housing payments, which can be utilised to close the gap in rent between what UC pays and your current rental commitments. Also, the Government’s Money Advice Service & Citizens Advice are a good online resource for what you are entitled to.

 

2.      Adopting, Adapting & Improving Your Southampton Buy-to-Let Property

Demand for gardens or office space means Southampton landlords will need to think outside the box. Those Southampton homes with tenants sharing (e.g. HMO’s and shared houses) might need to price their pre-coronavirus 4 bed sharing house to maybe a 3 bed sharing house plus a work/office room and, if you haven’t already, installing a top of the range, fast and dependable internet connection could be the thing that swings it. Outdoor space and gardens are really high on housebound tenant’s wish lists, in fact I have come across some Southampton tenants demanding that new rental properties have a landscaped garden or those that bought a dog or cat for company during the first lockdown, are looking for their landlords to relax their ‘no pets policy’.

 

3.      Hold On to Your Good Southampton Tenants

Those Southampton buy-to-let landlords with decent tenants, who find themselves in financial dire straits should consider attempting to keep them, even if their own monetary circumstances mean they have to decrease their rent somewhat over the short term. Now of course, I would expect that tenants need to prove their circumstances, yet if their plight was real, surely it would be a wise choice to reduce the rent by perhaps £50 a month and support your tenants? You know they are taking great care of your Southampton rental property and rather than risk the issue of advertising your empty buy-to-let property  – particularly when there is no assurance you will achieve your existing rent and ultimately risk drawn-out void periods with no rent coming in at all. What I would suggest therefore,  in such circumstances, is that you create a new Assured Shorthold Tenancy agreement with a longer term with your existing tenant at a lower rent – a temporary measure but with peace of mind for both parties which can then be reviewed once that tenancy is up for renewal.

 

4.      Carry out Firmer Checks on Your Prospective Southampton Tenants 

Many private Southampton landlords and a few slipshod Southampton letting agents tenant checks are somewhat lacking in their depth. Trust me, there is tenant referencing … and then there is ‘proper’ forensic tenant referencing. As certain parts of the British economy have been hit harder than others, Southampton landlords must consider when choosing their new tenants, the type of work they do and who their employer is, to enable them to decide on their future capacity to meet their rental commitments.

 

5.      Rent Guarantee Insurance for your Southampton Rental 

There are still insurance companies offering landlord rent guarantee insurance if your tenants become unable to pay the rent. Many insurance firms removed these insurance products in the first lockdown, yet some have returned to the insurance market although insurance premiums have gone up in price. Remember to check the small print of the insurance, although you will get a lower insurance premium if you can show stringent tenant referencing (as per the previous point). 

 

The Nuclear Option – Eviction

Southampton landlords need to be conscious that, should their tenancy run into trouble, the Government have changed the rules when it comes to eviction during the coronavirus pandemic. Going into the first lockdown, there was already a backlog in the courts and now, just before going into the second lockdown, bailiffs have been instructed not to enter rental properties in high risk Tier-2 and Tier-3 Covid-19 areas.

 

Eviction really does have to be the very last option. Negotiation or arbitration will nearly always deliver quicker and improved outcomes for both parties. Southampton landlords who do come to mutually agreeable arrangements with their tenants by briefly reducing the rent, or allowing payment holidays with legally enforceable pay back schedules should ensure they get the agreed terms in writing and run by a solicitor or their agent (feel free to drop me a note if you need advice).

 

However, if eviction is required, it doesn’t mean the tenant gets off ‘scot free’. Evicted tenants, depending on their circumstances, will either be placed temporarily into an inexpensive B&B, asked to move in with family or given one of the local authorities temporary accommodation properties, with the goal to then move them into long term council accommodation (as the chances of obtaining private rented accommodation would be slim with agent’s heightened reference checks – more of that at the end).

 The Potential Cost of Evicting a Problem Southampton Tenant

 The average rent for a Southampton property currently stands at £1,372 per calendar month.

Thankfully, evictions are very rare.  Last year before lockdown, tenants from 201.4 rental properties were evicted each working day in the UK ... but if yours was one of those, that is still a potentially large cost.

Working on the basis that most evictions from the first rent not being paid, through to eviction, refurbishment of the kitchen, bathroom, carpets and d├ęcor (because often these do need sorting/replacing) were taking on average between eight to nine months before coronavirus hit, (plus the mortgage payments), this means a Southampton landlord could be hit by a £34,951 bill, broken down as follows:


Missing rent (8½ months)

£11,662

New kitchen

£4,133

Bathroom

£2,479

Carpets

£2,261

Redecorate

£1,878

Agents fees

£1,225

Legal fees & court fees

£3,500

Mortgage payments

£7,814

Total

£34,951

 

 What that would be now is anyone’s guess – yet it could be a lot more.

 

This is why it is so important to get the best tenant from day one. Many Southampton tenants, who know they wouldn’t pass the references of letting agents, are attracted to those private landlords who don’t use a letting agency, as they know their referencing checks are not as strict and may be a softer touch. That’s not to say going with a letting agent is a guarantee you won’t need to evict; it just means the chances are much, much smaller. Like anything in life - it’s a choice.

 

Whether you are a Southampton landlord who uses a letting agent or not, and feels their reference checks are not to the standard or level you might hope or want and you need a  chat about the best rental guarantee insurance, then give me a call ... what have you got to lose?


  CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

 

If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.

 

If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.

 

 

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/belvoirsouthampton/

 

Twitter, https://twitter.com/sotonbelvoir

 

LinkedIn, https://www.linkedin.com/in/brianlinehan

 

Website, https://www.belvoir.co.uk/offices/southampton

Thursday 19 November 2020

As Southampton First-Time Buyers are Being Locked Out of the Southampton Property Market – Rents Have Risen by 2.8%



    CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

With the banks reducing the number of low deposit mortgages (i.e. deposit of 10% and below) since Covid-19 hit in the spring, this has meant that the number of Southampton first-time buyers has been decreasing quickly, meaning many of those would-be Southampton buyers wanting to make the first step on the Southampton property ladder will stay in the Southampton rental sector.

 

This has caused demand to grow amongst Southampton renters for larger homes to ride out Covid, as they hunker down for the long haul to wait for normality to return to the property market. This has caused …

 

Southampton rents to rise from £1,335 to the current £1,372 per month over the last 12 months, an increase of 2.8%.

 

Interestingly, the opposite is happening in Central London, where the rents tenants are having to pay have dropped by 3.8% in the last 12 months, as demand has dropped like a stone. It appears Central London tenants are looking to move out to the suburbs, in search of bigger homes, gardens and green open spaces. For example, the average rent for a 1-bed apartment in St. John’s Wood currently stands at a very reasonable £1,817 per month whilst a 2-bed apartment in Kensington and Chelsea is currently at an average bargain rent of £3,715 per month (yes, they might be low compared to last year, yet for us in Southampton, that still seems like a lot of money!). Also, there has been further downward pressure on Central London rents, as many Airbnb landlords have dumped their short-term holiday let properties onto the long-term rental market as the tourism in the capital has dwindled because of the pandemic.

 

This has been the sharpest drop in Central London rents since the summer of 2009, when the property market was still stumbling from the Credit Crunch.

 

This means there is a reverse of the trend of the 2010’s (2010 to 2018 to be exact), when initially the London property market was shooting up whilst the rest of the country was in the doldrums. When the rest of the UK did start to rise slowly in 2013, London kicked on even further like a rocket … yet now it appears the opposite is happening.

 

Getting back to Southampton, according to the Land Registry, property values currently stand 1.3% higher than a year ago, this is split down as follows:

 

·         Detached Southampton homes 2.5% higher

·         Semi-detached Southampton homes 3.3% higher

·         Townhouse / terraced Southampton homes 2.3% higher

·         Southampton apartments / flats 1.2% lower

 

Yet, do remember, these figures do NOT take into account the prices paid by desperate Southampton buyers this summer, often paying top dollar to secure the property. This will only filter through in the figures released in the spring.

 

So, why are the banks curtailing the number of low deposit mortgages, meaning that first-time buyers must find a much larger down payment before they are able to buy their first Southampton property?

 

The reason is the banks are fearful of a house price crash in 2021 (although if you recall I wrote about that a few weeks ago and the reasons why that is less likely to happen). They too are afraid of the frothy nature of the property market since the end of the first lockdown in late spring. The bank is lending its own money to buyers and no mortgage lender wants to be holding an enormous amount of these types of high percentage mortgages if house prices fall in 2021, because the bank would be saddled with negative equity and repossession on their hands (and we all know what that did to the housing market in the late 1980’s and early 1990’s as repossessions rocketed).

 

This can quite clearly be seen in the pricing and availability of low deposit mortgages. As the Bank of England has reduced its base rate to 0.1%, in the last 12 months 10% deposit mortgages rates have actually increased from 2% to 2.8%. Also, when lenders have been offering 10% mortgages throughout the summer, borrowers have had only a 24-hour window to commit before the lender withdraws the mortgage product from the market because of over subscription. As with all economics, if demand is greater than supply, the price goes up. That extra 0.8% doesn’t sound a lot until you realise a first-time buyer would have to pay an additional £167 per month in interest payments on a 10% deposit mortgage, assuming they borrowed £250,000.

 

However, it’s not all doom and gloom for first-time buyers as there are embryonic signs that the 10% deposit mortgage market could gradually be returning to normal, as I have recently heard some lenders are taking up to a week for their 10% deposit mortgage offers to run out. Fingers crossed!

 

So, what does this all mean for Southampton landlords? Those Southampton landlords with properties with gardens and larger rooms will be seeing increased demand. The ability to have pets in the rental property is also an advantage, and depending on the property, can add a decent premium to the rent that can be charged.

 

One final thought though for all homebuyers in Southampton, be aware it’s going to be very challenging to get your house purchase through in time to meet the 31st March 2021 stamp duty holiday cut off if you are starting the process in November. Make sure your lender and solicitor have the capacity to meet that deadline and when you are asked for information, you drop everything to provide it. The odd day delay here and there will mean the difference between you getting the keys for your new Southampton home before the end of March 2021 and saving thousands of pounds in Stamp Duty Tax … or feeling a fool from the 1st of April 2021 and having to pay the tax!


  CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

 

If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.

 

If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.

 

 

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/belvoirsouthampton/

 

Twitter, https://twitter.com/sotonbelvoir

 

LinkedIn, https://www.linkedin.com/in/brianlinehan

 

Website, https://www.belvoir.co.uk/offices/southampton

Thursday 12 November 2020

Southampton House Prices 2021: What will happen to the value of your Southampton home next year?



   CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

What will a no deal Brexit on the horizon, the end of the stamp duty holiday in March, mortgage payment holidays coming to an end, unemployment set to rise after furlough and ongoing on/off coronavirus restrictions do to the Southampton property market and the value of your Southampton home?

 

In the late spring of 2020, every man and his dog were forecasting impending doom on the British property market. Drops of 10% were considered optimistic as we all held our breath after lockdown was relaxed. Yet, the property market didn’t listen to the forecasters. UK property values today are 2.5% higher than they were a year ago, and more locally,

 

Southampton house prices are 1.3% higher than a year ago.

 

So, what exactly is going to happen to the Southampton property market in 2021?

 

Well, with the end of furlough and 1.7m people still on the furlough scheme at the start of October, a number of economists are saying that unfortunately many of those furloughed will become unemployed. Unemployment currently stands at 4.5% in Q3 2020 (compared to 3.8% in Q3 2019). The Government’s independent Office for Budget Responsibility believes the unemployment rate will peak at 9.7% in early 2021, and then return to pre-coronavirus levels in 2022. In the past recessions of the early 1980’s, early 1990’s and Credit Crunch of 2009, when unemployment went up, the property market went down.

 

Yet, in this recession, the link between unemployment and property values may not be so direct.

 

So why is the link between unemployment and house prices potentially broken? It comes down to interest rates.

 

The reason Southampton house prices have gone up by 370.57% since the middle of the 1990’s isn’t because the labour market has got so much sturdier, nor that the economy has outperformed every G8 country, or that the UK has had less boom and bust economic cycles than the previous decades. Instead, it’s because of the fundamental and underlying decline in the Bank of England (BoE) interest rates.

 

High BoE interest rates equal high mortgage payments which holds everything back regarding the property market. In the 1980’s, the average BoE interest rate was just over 11%, making mortgage payments very expensive and keeping property prices dampened. In the 1990’s, the average BoE interest rate was a little over 6%, in the 2000’s just over 4%. However, in the 2010’s, it had been a really low 0.5%. Now with interest rates down to 0.1% because of coronavirus and the BoE threatening negative interest rates, there appears little threat of an eruption in mortgage repayment costs.

 

With mortgage payments at an all-time low of just under 30% homeowners' disposable income (compared to 48% in 2007), those middle-aged people lucky enough to still be in a job (who are mainly made up of workers that are spending a lot more time working from home), they could be more inclined to dedicate more of their monthly income to mortgage payments than they did pre-coronavirus for a bigger garden or a move out of the big cities?

 

So, if unemployment isn’t going to make a huge difference to the Southampton property market, what is?

 

Most commentators believe a no deal Brexit will have hardly any short-term effect on the property market (apart from certain upmarket parts of central London).

 

The Stamp Duty holiday ends at the end of March 2021 and that certainly will reduce the number of Southampton people moving (as many moved their plans forward to beat the deadline) meaning there will be less Southampton people moving in 2021, yet that will curtail the supply of property for sale and hence keep Southampton property prices higher.

 

Next, the Help to Buy scheme, (started in 2013 and where the Government underwrites part of the mortgage for the first time buyer, meaning they can obtain a 95% mortgage) ends in April next year, yet the Tories indicated at their conference last month they would probably create ‘Help to Buy - Part 2’.

 

The bottom line is in the early 1980’s and 1990’s recessions, when interest rates were over 15%, obviously homeowners couldn’t afford to keep up the mortgage payments when made redundant or on reduced wages, so many handed in their keys to the banks and homes got repossessed, thus exacerbating the issue with falling property values.

 

However, with interest rates so low, this will not be the case forever. I envisage that UK property prices will be between 4% to 5% higher by December and Southampton values just behind that at 2% to 3% higher, before levelling out in 2021 (although we might see a modest dip in certain sectors and types of Southampton homes depending on location and condition).

 

My advice to Southampton buy to let landlords is to wait on the subs bench until April 2021. Something tells me there will be some Southampton landlords who will be looking to exit the rental market after having their fingers burnt after the eviction ban has been lifted.

 

I also suspect those Southampton first time buyers, eager (and able) to break free of the rental-rat-race will want to take up the anticipated ‘Help to Buy - Part 2’ scheme, particularly if the BoE base rate stays low. The other winners in 2021 will be low mortgage/equity rich households upsizing to the countryside or leafy suburbs to test out their boss’s promise of ‘flexible-working’.

 

Yet the losers will be the 18yo to 29yo renters … most likely to be made redundant and least likely to buy a home.

 

My advice to the Government for this cohort is to not ignore them once the country is out of this coronavirus situation. It’s all very good keeping the Home Counties Tory voting Baby Boomers happy with green belt policies and other policies to keep their property values higher, yet as the Generation X and Millennials get older and take over as the largest demographic to keep happy (for the polls), the hitherto inconceivable action of the Government levying Capital Gains Tax on your main home may come to fruition.

 

I mean, we have £400bn to pay back because of coronavirus … it has to be repaid and it has to come from somewhere. Those denied real access to buying their own home in the last 10 years, because of massive house price gains over the last 25 years, could vent their anger via the ballot box - if not at the 2024 General Election, maybe in 2029, when they realise that the futile housing policies of both Labour and Tories of the last 23 years have left them with enduring financial diffidence.

 

Maybe we should all look to the grocer’s daughter from Lincolnshire who in 1979 set out a bold vision of home ownership for everybody. Whichever political party picks up the truly batten and reframes it for the current 2020’s generation and comes up with the goods, will be the ultimate winner in this game.

    CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

 

If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.

 

If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.

 

 

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/belvoirsouthampton/

 

Twitter, https://twitter.com/sotonbelvoir

 

LinkedIn, https://www.linkedin.com/in/brianlinehan

 

Website, https://www.belvoir.co.uk/offices/southampton

Friday 6 November 2020

Southampton Homebuyers Have Saved £1,023,840 Thanks to the Stamp Duty Holiday – Yet Many Could Miss Out




  CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

Southampton homebuyers and Southampton landlords purchasing residential property have saved £1,023,840 since the Chancellor reduced stamp duty on 8th July 2020, yet many more Southampton homebuyers could miss out.

 

My analysis of properties sold in Southampton from the Land Registry between the introduction of the stamp duty holiday on 8th July 2020 and 14th August 2020 (which is the most up to date sales data), reveals that many Southampton homeowners have saved a considerable amount of money in stamp duty. According to my research…


since the stamp duty holiday was launched, 167 Southampton homeowners have saved on average £6,131 each.

 

That’s a total Southampton property value of £53,876,932.

 

Mind you, it’s not all good news as I estimate 367 Southampton homebuyers risk missing out on stamp duty savings (worth as much as £15,000 each) due to solicitors/conveyancers and mortgage lenders struggling with demand and failing to hit the 31st March 2021 deadline.

 

The short-term tax relief, together with the easing of lockdown restrictions, has seen demand for Southampton property soar this summer as Southampton property buyers race to move home.

 

Chancellor Rishi Sunak introduced a stamp duty holiday in the summer, with the stamp duty holiday due to end on 31st March 2021. Yet, I fear the combined pent-up demand caused by…

 

  • ·         the post Boris Bounce
  • ·         people wanting to leave the metropolitan city centres for homes in the countryside
  • ·         property with gardens
  • ·         property with extra rooms for working from home
  • ·        and the stamp duty savings

 

…has created a certain amount of constipation and backlog in the Southampton property market.

 

I know 31st March 2021 seems an age away, however nothing could be further from the truth. The average Southampton property sale was taking 19 weeks between the offer price being agreed and the keys/monies handed over BEFORE THE POST-LOCKDOWN. So with as many as 40% to 50% more Southampton homeowners in that same sales pipeline of agreeing the offer and the legal and finance to be sorted as we speak, solicitors/conveyancers and mortgage lenders are really struggling with demand for their services, meaning the average time will increase. Hence, I believe as many as…

 

367 Southampton people could miss out on the

£2,250,000 stamp duty tax savings.

 

There is time left to sell and legally complete your Southampton property sale before 31st March stamp duty deadline if you put the property on the market now with a realistic asking price, a decent marketing plan and razor sharp reflexes when it comes to the legal and mortgage work.

 

Yet with 40% to 50% more home movers in the system, those looking to sell their Southampton home should be very suspicious of agents being too optimistic on their initial asking price (many estate agents get a commission to put a property on the market, meaning they over-egg the pudding on the suggested asking price to flatter you, only to badger you to reduce the asking price weeks later).

 

Those wasted weeks at an inflated asking price will mean the difference between you securing a buyer and you then buying your next Southampton home with or without the stamp duty savings, which are up to £15,000 per home move.

 

And whilst many Southampton buyers seem ready, willing and able to pay top dollar prices for Southampton properties that match their changed post-lockdown home needs, speaking privately to many Southampton agents, some Southampton homeowners’ price expectations for their Southampton homes are now becoming too optimistic, meaning they will undoubtedly lose out.

 

We also can’t forget as many as 1 in 5 mortgage surveys are being down valued by the surveyor, meaning unless all parties are willing to negotiate, the sale falls through and the homeowner has to go back to ‘Square One’.

 

My best piece of advice for those currently sold and in the sales systems with lawyers and mortgage brokers is to speak to your solicitor and mortgage broker every single week and ask if there is anything you need to do to ensure the sale proceeds smoothly and expediently. Also, if you are asked for any information from your solicitor or mortgage broker in between times, drop everything and respond quickly to their request. The odd day here and there will make all the difference.

   CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

 

If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.

 

If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.

 

 

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/belvoirsouthampton/

 

Twitter, https://twitter.com/sotonbelvoir

 

LinkedIn, https://www.linkedin.com/in/brianlinehan

 

Website, https://www.belvoir.co.uk/offices/southampton