... and new 5% deposit mortgages for
Southampton first-time buyers
The Chancellor Rishi Sunak announced two initiatives to keep the Southampton property market firing on all cylinders into 2021.
Firstly, the £500,000 zero-rate Stamp Duty band has been extended to the 30th June 2021. After then it will phase down to £250,000 for an additional three months, returning to the pre-pandemic levels on the 1st October 2021. Secondly, Mr Sunak announced a scheme that will allow Southampton first-time buyers to buy their Southampton home with a 5% deposit from this April. Let me look at what each initiative means to the Southampton property market.
Stamp Duty Holiday extension for Southampton home buyers
Coming out of the first lockdown in the early summer of 2020, there was a lot of apprehension that the British property market would flounder. Therefore, when the Stamp Duty Holiday was announced back in July 2020 to boost the property market, the deadline was set at the 31st March 2021. Little did anyone know of the snowball effect of people wanting to move because of the initial lockdown in the spring of 2020, the pent-up demand following the conclusion of the EU negotiations with the subsequent ‘Boris Bounce’ and then the Stamp Duty Holiday which made the perfect storm for what has been the busiest property market in Southampton since 2001/2.
The average stamp duty paid by a
Southampton homebuyer is £5,373
The reason the Stamp Duty extension is important is that many estate agents and solicitors have been warning for the last couple of months that home buyers would pull out of property deals or renegotiate if they could not complete their sale in time before the Stamp Duty Holiday ended.
So, by phasing down the Stamp Duty Holiday, this will allow some breathing space for burdened solicitors and mortgage lenders, thus decreasing the number of buyers pulling out of their property purchase because they unexpectedly have to find up to an extra £15,000 in Stamp Duty when property sales do not complete on time.
There are currently 2,280 properties that are sold STC in Southampton alone and the vast majority of those will save money on their stamp duty because of this extension
So, what does the Stamp Duty extension mean for Southampton house prices?
The extension has heightened confidence in the Southampton property market. The Government watchdog ‘The Office for Budget Responsibility’, has predicted that house prices in 4 years’ time will be just over 13% higher, compared to the pre-Christmas predicted figure of 11% growth (over the same time frame).
5% deposit mortgages for Southampton first-time buyers
From next month, Southampton first-time buyers will be able to buy Southampton homes worth up to £600,000 with a 5% deposit and a Government-backed mortgage with a fixed rate of up to 5 years.
Rishi Sunak wants to turn the millennial ‘Generation Renters’ into ‘Generation Buyers’ and believes this initiative should be able to help two million people get on the property ladder. When we look at what that would mean for Southampton, I estimate …
8,167 Southampton people could be helped onto the
Southampton property ladder with these 5% deposit mortgages
The Government backed scheme will be open to Southampton first-time buyers for 21 months (until the end of 2022) and available from lenders including NatWest, Lloyds and HSBC (plus others to be announced soon). It will be available on all Southampton homes new or second hand (previous schemes applied to new homes only).
5% deposit mortgages were all but withdrawn from the market at the start of the pandemic in spring 2020 with an almost default minimum deposit of 10% (even as high as 15% in the autumn just gone) putting homeownership out of reach for all but the wealthiest Southampton first-time buyers.
I must admit I found it a scandal that homeownership among the 25 to 34 year olds plummeted from 69% in 1981 to 36% by 2014, although with certain Government incentives and low interest rates since then, that had risen to 41% by last year, but it’s not enough
With so many young families paying huge sums in rent, who could effortlessly afford to make mortgage repayments on the same property, they haven’t been able to save enough for a 10% initial mortgage deposit, let alone 15%.
Yet now with these new 5% deposit mortgages, many Southampton first-time buyers will be able to afford to buy their first home in Southampton. Banks will typically lend between four and a half and five times the gross annual income – this means with a modest 5% deposit; many Southampton 20 and 30 somethings will now be able to buy their first home. Just before I finish this topic, the 5% deposit mortgages will also be available to current Southampton homeowners who don’t have the equity built up in their existing home – thus helping second or third (or more) time Southampton buyers as well.
How do both these changes effect Southampton buy-to-let landlords?
I know many of you Southampton landlords are adding to your Southampton rental portfolio because of the Stamp Duty Holiday and with the extension, you too will save some money from it. The issue of first-time buyer mortgages does mean the demand for private rented accommodation in Southampton might not be as strong in the coming decade.
Don’t get me wrong, tenant demand will continue to outstrip supply of Southampton rental properties for the foreseeable future, yet the tenant/landlord balance could alter slightly in the medium term. Southampton landlords need to take a long hard look at their properties and ascertain if they are fit for purpose both now and into the 2030’s. Tenants are becoming a lot more demanding of what their rental property offers. Wood chip wallpaper, avocado green bathroom suites and kitchens fitted in the 1990’s (or before) simply won’t cut the mustard in the next decade.
The demand from Southampton tenants for properties with larger gardens, or the ability to keep pets or an extra reception room garden/office to allow them to enjoy their rented home more and also being able to work from home will ensure greater demand for your rental property … and the best bit, they will pay handsomely for that in higher rent.
If you are a Southampton homeowner, buyer, tenant or landlord and you want to discuss your options on selling, buying or renting a property in Southampton and the surrounding area, do not hesitate to contact me personally.
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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