No Deal Brexit – The Prediction for Southampton House Prices

Roll the clock back to April 2020, and major financial economists and property market commentators were sounding the alarm. The very best-case scenario was a 5% drop in property values by the end of the year, and most were in the 10% to 15% range. They forewarned the Covid-19 stimulated recession would trim tens of thousands of pounds off the value of Southampton homes.

Yet the Southampton property market didn’t seemed to get the memo on that, and now as we find ourselves at the end of 2020 and the worst of lockdown restrictions appear to be passed, vaccinations on the way and economy starting to grow, Southampton property prices seem to be doing quite well.

What happened to the Southampton house price crash that didn’t materalise?

Before I answer that, it reminded me of what the Treasury said in 2016 about a leave vote on the Brexit referendum. The considered opinion of the Treasury was house prices would drop by 18% if the country voted to leave the EU, so let us see what that would have done to Southampton house prices if that had taken place and then what exactly has happened in the last four and half years …

 

	Average Value 2016	Predicted Drop by The Treasury because of Brexit	Average Value Today	Uplift in Value in Last 4.5 Years	% Increase since Brexit Vote
Southampton Detached	£410,900	£336,900	£460,200	£49,300	13.0%
Southampton Semi	£252,000	£206,600	£292,100	£40,100	14.9%
Southampton Terraced / Town House	£211,300	£173,300	£247,300	£36,000	18.0%
Southampton Apartments	£171,000	£140,200	£188,400	£17,400	9.2%

 

So why has the Southampton property market not matched the property pundits twice in the last five years or so?

 

Well for most of us, owning a property is about having somewhere to live rather than an investment (an Englishman’s home is his castle??). Nevertheless, once a homeowner is on the proverbial ‘property ladder’, it cannot be denied that it is eternally beneficial to know, as a homeowner, that you have made a healthy investment in your home and that the value will rise to alleviate the ache of trading up market — or down market when you retire.

 

Those Southampton homeowners who own detached homes would have made an average of £49,300 profit, a rise of 13.0% or a weekly profit of £189.62 — calculated between the price they would have paid in the summer of 2016 and the price they would sell for today. Looking at the weekly profit for all property types in Southampton since the Brexit vote …

 

·        Southampton detached homes weekly profit of £189.62 per week

·        Southampton semi-detached homes weekly profit of £154.23 per week

·        Southampton terraced homes/town houses weekly profit of £138.46 per week

·        Southampton apartments weekly profit of £66.92 per week

 

Whilst it is no surprise the property market boom was inspired by the Chancellor’s Stamp Duty holiday; this is not exclusively the Chancellor’s achievement. The three ‘D’s have been with us throughout 2020, Covid or no Covid (Debt, Divorce and Death), together with a huge shift in the way Southampton homeowners see their homes.  With us cooped up during the lockdown and working from our dining room tables, the want and need of Southampton people to have a home with an extra bedroom to work from, together with a garden has been one of the biggest drivers this year… hence the rise in demand.

 

So, what of 2021? It’s true that the country will have high unemployment, yet at the same time, we have ultra-low interest rates and for the last 20 years, on average we have only built 150,000 households per year as a nation, but needed 300,000 per year to keep up with immigration, people living longer and changes in the way households are made up (compared to the Millennium).

 

Many people can predict what will happen – yet none of us really know what will actually happen to the Southampton property market in 2021.

 

Covid was a black swan event and the fallout from that, I believe, has changed Southampton peoples' lives and their lifestyles, especially how they see their home. Instead of making predictions, nothing can get away from property market fundamentals, which have driven price booms on the back of high demand for homes and low supply (i.e. properties coming onto the market) and price crashes on the back of over-supply and low demand. Only time will tell if, in 2021 the Southampton property market will see a flood of properties coming to the market because of debt or the demand for larger homes continues to rise unabated.

 

Please do let me know your thoughts on the matter.

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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.

 

 

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