Will the Southampton Property Market Continue to Boom?

 

All the signs are that the Southampton housing market is sat on good foundations, yet one key hazard could still scupper the market.

 

‘UK Property Prices Rising at Record Levels’ is the headline of many newspapers. In the last few weeks, the Halifax reported they had grown by 6.5% in the last 12 months, whilst the Nationwide said 7.1% and not to be outdone, the Government’s own Land Registry said 8.6%. Nothing new there then you might think, don’t UK house prices always increase?

 

Actually, they don’t, as many Southampton homeowners will remember 2009, when they dropped by 19%. Also, some more mature Southampton homeowners will remember the early 1990’s where house prices dropped just over 40% over 4 years (after the 1989 property crash). So, the increase in UK house prices over the last 12 months has mystified all the forecasts made by most economists as…

 

house prices were forecast to drop during the pandemic because during the previous six UK recessions experienced since WW2, house prices have always fallen sharply in real terms.

 

Yet 2020 was different with house price growth increasing at its highest rate since 2014 as the substantial Government support programmes (including Bounce Back Loans, grants and furlough) has mollified the hit to household incomes. Add to that the pent-up demand from the Boris Bounce, all the people working from home wanting an extra room for an office and therefore needing to move, plus the stamp duty tax holiday, with the cherry on the cake of 0.1% Bank of England interest rates keeping borrowing affordable. This has meant…

 

Southampton property values are 7.8% higher than a year ago.

 

Yet the affordability of property is a big issue going forward. By the time of the height of the last property boom in 2008, the national ratio of average property values to earnings had risen from 5.1 in 2000 to 8.8 (i.e. the average house price was 8.8 times the size of the UK’s average person’s annual earnings). We then had the property crash in the proceeding years, and the ratio dropped to around late six’s/early sevens. However, over the last few years, the ratio has been steadily rising and now with the recent growth in demand for property (the five reasons mentioned in the previous paragraph), the ratio has now smashed past nine. Looking locally…

 

the ratio of average property values to earnings in Southampton as a comparison was 3.9 in 2000, rising to 6.0 in 2008, dropping to 5.3 the year later when the Credit Crunch hit, and now currently stands at 6.8.

So, are we heading for another house price crash? Maybe, maybe not - because the House Price to Earnings ratio only tells us part of the story. Another indicator of the property market is mortgage affordability, which measures the proportion of mortgage payments to average incomes. For all mortgage holders, in 2015, this stood at 24.13% and today it is only just above the national long-term average of 25%, demonstrating that property is still affordable.

 

Yet, the life blood of the property market are first-time buyers. The long-term average percentage of income which goes on mortgage payments for first-time buyers is 33%. Just before the 1989 property market crash, this stood at 54%. Whilst just before the 2008 property crash, it reached 49%. Today, it stands at 31.7% (and the reason it’s so low even with record high property prices is low interest rates, because when mortgage interest rates are low, this permits people to afford larger mortgages, which enables them to bid up house prices).

 

So why aren’t more first-time buyers buying more homes? Well in fact they are buying more homes. At the turn of the Millennium, just over half of 25yo to 35yo were homeowners and by 2014, this had dropped to just a third, although since then it has increased to 41%. Now with the reintroduction of the Government backed 95% mortgages in April, this demand will continue further.

 

Once furlough ends, unemployment will doubtless rise in the following 12 months, yet the economy is more than likely to be in a boom phase, so by the spring/summer of 2021, the unemployment rate should start to fall.

 

So, does everything look great for the Southampton property market?

 

Before you get the Champagne out, there is a cloud on the horizon - the possibility of higher interest rates.

 

Undoubtedly, for the next few years, interest rates will not go up (and if they do – it will only be nominally). However, down the line it may be a different tale. Interest rates are used to control a number of economic factors, one being the currency and secondly inflation.

 

As many suggest, if we get an economic boom in the next 12 to 18 months, as we come out of lockdown, this will put upward pressure on the price of goods and services. Normally, when prices go up (inflation), to ensure that inflation doesn’t get out of control, interest rates are normally increased to dampen down the inflation.

 

So, will interest rates rise? Undoubtably they will. Southampton homeowners and buy-to-let landlords should seriously consider protecting themselves with fixed rate mortgages (yet 3 in 10 mortgagees are still on variable rate mortgages!). I believe we will see some inflation in the order of 3% to 5% in the coming 24 to 36 months, yet the interest rates won’t be enabled to bring it down. We had a similar case in the early 2010’s when we had a mis-match of demand and supply of goods, and inflation spiked to 5%, before returning back to its long term 2% average quite quickly thereafter.

 

The Chancellor will also encourage some inflation to reduce the ‘real’ cost of the Billions he has borrowed because of the pandemic, yet won’t want to see interest rates increase to take the cost of the borrowing upwards.

 

If you are considering moving home or buying/selling a buy-to-let property in Southampton in the next 12 to 18 months, and want a chat about your options, don’t hesitate to drop me a line.

 

Finally, these are interesting times ahead – I would love your thoughts on this matter. Please do share them in the comments.

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

Southampton Buy-to-Let Property Market Going into Crisis?

… as Southampton first-time buyers now only need a 5% deposit for a mortgage.

 

Southampton landlords, sell your property portfolios, your tenants will soon be leaving in droves as they buy their first home with the new 5% deposit mortgages backed by the Government’s new mortgage-guarantee scheme revealed in March’s budget! These 95% mortgages are to be supported by the Treasury, lessening losses for mortgage lenders should the borrower be incapable of repaying and get repossessed, as the Government want Generation Rent to turn into Generation Buy.

 

This sounds like the death knell for buy-to-let investment in Southampton as many tenants will soon be buying their first home

– or is it?

 

It’s true that on first impressions it might look like many Southampton first-time buyers will now be leaving their rental properties in their droves with this new low deposit mortgage scheme. However, these potential Southampton first-time buyers are facing four big issues which will inhibit their ability to take advantage of the mortgage scheme, meaning many will continue to rent.

 

Firstly, the mortgage rate for 95% mortgages has increased. The lowest five-year fixed-rate mortgage with a 5% deposit today (with Barclays) is 3.45%, up from 2019’s best rate of 2.75%. That doesn’t sound a lot, yet it makes a massive difference to the monthly mortgage payments (as you will see below).

 

Secondly, due to pent-up demand post lockdown and the stamp duty holiday, this has increased demand for Southampton property, placing upward pressure on Southampton property prices which has made it problematic for first-time buyers to get on the Southampton property ladder. This has meant ...

 

the average price of a Southampton first-time buyer property has risen from £271,882 to £304,334 in the last 12 months …

in turn this means, Southampton first-time buyers have had to save an additional £1,622.60 for their deposit to keep up with the house price increase. So…..

 

the monthly payment on a 30-year mortgage for a Southampton first-time buyer has jumped from £1,054.44 per month in 2019 to £1,290.21 a month today, an increase of £235.77 per month.

 

The third issue is demand for Southampton first-time property from buy-to-let landlords is surpassing supply, adding further fuel to the fire of driving up prices. Finally, the fact that most Southampton first-time buyers are of the younger generation and it’s the younger workers that have been most at risk of unemployment or salary cuts during the covid crisis.

 

	5 Year Fixed Rate - 2019	5 Year Fixed Rate - 2021
Purchase Price	£271,882	£304,334
5% Deposit Required	£13,594	£15,217
95% Mortgage Borrowed	£258,288	£289,117
Annual Interest Rate	2.75%	3.45%
Mortgage Length (in years)	30	30
Mortgage Payment per Month	£1,054.44	£1,290.21
Sum of Mortgage Payments over whole mortgage term	£379,598	£464,476
Total Interest Cost over the whole mortgage term	£121,310	£175,358

 

 

You might say things will change in 2022 but would it surprise you that 95% mortgages have been available to first time buyers since the summer of 2010 and were only withdrawn during the first lockdown in 2020?

 

Since 2010, even with ultra-low interest rates, the number of private rented properties in the UK has grown by 580,000 households from 3.8m households to 4.4m households and will continue to grow, let me explain why.

 

The notion that buy-to-let property is a strong long-term investment has not altered with the pandemic. Since 1930 with the all the crises we have had with WW2, the Oil Crisis, 3 day week and hyper-inflation in the 1970’s, Southampton property has been a hedge against inflation and in addition, delivers a decent income yield of 4% and upwards. Not bad when compared to the 0.5% with a savings account (if you are lucky).

 

It is a fact that those landlords that see buy-to-let investment

in Southampton as a long-term strategy will win.

 

It is certainly the case that I am starting to see an exodus of the ‘amateur landlord’, leaving more professional landlords who see ‘landlord-ing’ as a business, not a game. Those long-term Southampton landlords can see through the present predicament as they have a long-term buy-to-let investment mindset.

 

Many Southampton landlords are intensely aware that demand for high quality private rental properties in Southampton is only going to flourish as a consequence of the pandemic; whilst not forgetting that demand presently exceeds supply. Also, those same Southampton landlords know that a responsible approach to their tenants with regard to condition and repairs is a key to ensuring the rent keeps flowing in with minimal void periods.

 

Finally, even though Southampton house prices are, on average, on the up, there are still some bargains even in this market. By doing their homework and working with an agent like myself, these savvy Southampton landlords are paying reasonable prices, thus giving them a sturdier rental yield and the ability for future capital growth.

 

If you are a Southampton landlord, as my clients all know, I am here to help and guide landlords on their long-term investment strategy. I therefore extend this offer to all Southampton landlords, irrespective of whether you manage your property yourself, or use one of my excellent competitor agents in Southampton, I am here to help.  

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

Turning browsers into buyers – make sure your online advert stands out

If you’ve ever searched online for a home yourself, you’ll know how many listings there are. The broader your search terms, the more results are going to come up, and then you start scrolling through…

 

So, what is it that makes you stop scrolling?

 

When you’re selling, how do you make sure your headline details stand out from the rest so that buyers click to find out more? Importantly, is the rest of your listing good enough to grab their interest and make them want to book a viewing?

 

The trick is getting the right balance of images and words: enough to whet people’s appetite so they’re keen to view, but not so much that they feel they’ve already seen everything your home’s got to offer. If you overdo the information, buyers could just put you on their shortlist and keep scrolling. Remember, the whole point of marketing is to get people through the door – so make them want more!

 

Photographs

Photographs are one of the most important features of your online advert. Around 90% of the information processed by our brains is visual, and we take it in tens of thousands of times quicker than text, so you really can’t overestimate the power of a great set of photos. Your main image should be your finest full shot of the front – and taking it at twilight with all the interior lights on can create a truly striking impression.

 

Then have between six and ten great photos of the inside and garden. You’ve got to show buyers the main rooms and some of the best features, leaving them excited about discovering the parts they haven’t seen.

 

Make sure your agent uses a professional photographer who can not only take the shots well, but also work with your agent’s team who are styling your home to create the best possible images. Interior shots look best taken on a bright day, so the photographer may need to make another visit to capture the all-important exterior twilight shots that will help ensure you have a great selection of images.

 

Buyers tend to connect with things that are both familiar and aspirational, so think about how different rooms look in glossy homes magazines and use that as a guide.

 

Here are some of the things you can do to get your home ready before the photographer and styling team arrive:

1. Vacuum and dust
2. Clean the windows and mirrors
3. Empty all the bins and put away your half-used toiletries
4. Tidy away any work, toys and kitchen clutter
5. Have some new candles, plants and/or flowers in the main reception rooms
6. Fill a fruit bowl for the kitchen
7. Straighten/plump up soft furnishings and towels
8. Take away rugs (plain floors make rooms look bigger)
9. Make sure all the light bulbs work, and have some spares, just in case!
10. Mow the lawn, prune the shrubs and flowers, and spruce up the garden furniture.

 

Then do your best to keep your home looking like that until it sells!

 

When your agent forwards the brochure for you to review, one thing to make a particular point of checking is whether the photographs flow ‘naturally’. Think about the route a viewing would take through your home and try to make sure the photographs follow that order, as far as possible. For example: the front exterior shot, then the hallway, followed by the living room, the kitchen, the staircase, the master bedroom, and so on. If the order makes sense, it will be easier for the buyer to visualise your home and may help create a stronger first impression.

 

 

The written details

Your headline and summary paragraph need to say what your home is, show where it’s located and make its best features shine in a way that entices potential buyers to look for more details. So, if your home is ideal for a family, highlight things like a fabulous open dining kitchen, games room, large garden and proximity to schools.

 

Then the bullet points should be between six and ten things that ‘snapshot’ the biggest selling features of your home. You’re trying to give buyers reasons to book a viewing, so make sure each point is a real benefit, for example:

• Unobstructed views across open countryside
• Master suite with private, south-facing balcony
• 24’ modern dining kitchen with Miele appliances and Rangemaster cooker
• Versatile, open-plan reception space
• Soundproofed home office with separate entrance.

 

Once people have seen the bullet points and been dazzled by your photographs, chances are they’re pretty much decided on whether to view. So, although they may want a little more information, they won’t want to have to scroll through reams of paragraphs describing every last detail.

 

The best approach is to have a short and sweet description of each room – the size and key fittings that will be included in the sale – and then any other particular features, like an incredible view, unique architectural detail or tech feature. At this stage, buyers really don’t need to know how many sockets or window locks there are; you’re just trying to get them interested enough to book a viewing, so stay focused on the key selling points.

 

Floor plans & PDF brochure

Floor plans really help buyers put room sizes into perspective and see whether the layout could work for them. They’re more-or-less standard these days, so make sure your listing has one.

 

Once you’re happy it’s correct, there are three things to check:

1. There’s a compass rose so buyers can easily see which rooms and areas of the garden face south
2. The total square footage is stated – that helps buyers compare homes to see how much space they’re getting for their money
3. The image opens at a decent size online.

 

A digital version of your full brochure should also be available as a downloadable PDF that buyers can save and print out. Although the agent may provide a hard copy at the viewing, many people like to check the brochure in advance to see if there are any photos or other information they might have missed – and it’s also useful for them to make notes on.

 

You’ve grabbed their attention – what next?

If you’ve ticked off everything so far, you should have buyers who are really keen to view. You’re halfway there. Now this is where the personal and professional skills of your agent come into play, to turn enquirers into buyers.

 

The buyer calls your agent

Some people know for sure that they want to view and they’re just calling to arrange the appointment. Other people have questions, and this is where an enthusiastic agent who’s familiar with your home can really help increase the buyer’s interest and firm up a viewing. So, check with your agent to make sure every member of staff has viewed your home and been briefed on any other relevant information, like whether you’ve found an onward purchase.

 

Whoever’s handling the enquiry should also qualify the person viewing, checking how they’re going to be funding their purchase and whether they have a home to sell. If you’ve found a new place you’ve fallen in love with and the person who wants to view hasn’t even put their own home on the market yet, there might not be much point booking an appointment. On the other hand, if they’re a cash buyer or they’ve sold and their buyer is desperate to proceed, they could be the perfect fit!

 

The buyer views your home

We’d suggest it’s always better to let your agent carry out accompanied viewings. Our experience means we know what information to give and how to sell the best features of your home; also, importantly, when the owner’s not there, buyers tend to feel more relaxed and talk more freely. That means we can usually get good feedback there and then and possibly even start negotiations on the spot.

 

Turning an offer into a sale

When a buyer really loves a home – and if your agent has done their job selling it! – they’ll often make an offer even after just one viewing. Your agent then has to negotiate the best possible price on your behalf, keeping you informed of every offer.

 

If your online listing is up to scratch and you’ve got your home looking its best, you should have plenty of interest. And if necessary, your agent can use feedback from viewings to make tweaks to your marketing along the way to ensure you’re appealing to as many buyers as possible.

 

Whether you’re already on the market or just thinking of selling, you can call us at any time for advice or to arrange a valuation – we’d love to hear from you! Call me on 02380018222 or email brian.linehan@belvoir.co.uk, and one I will get right back to you.