Why Are There So Few Southampton Homes For Sale?

 

 

·         There has been a 44% drop in the number of properties for sale in Southampton in the last 12 months.
 
·         1,349 Southampton homes have sold (stc) in the last three months alone, taking the time from the ‘for sale board’ going up to sale agreed to a median of 38 days.

    The £300k to £400k price range in Southampton is the most active, where it only takes 26 days to go sale agreed, but the £100k to £200k is taking 60 days.
 
·         Yet what issues cause the people of Southampton to want to move home and what can Southampton people, who want to move in 2022, do to ensure they sell and find the home of their dreams?

There are 951 properties for sale today in Southampton; roll the clock back exactly a year, and the figure was 1,701 - so there’s been a drop of 44%. This drop is being dubbed the ‘for sale board crunch'.

The ‘for sale board crunch’ has left many prospective Southampton home buyers stressed trying to find the right Southampton property as the number of properties available to buy has dropped significantly.

I am sure you know people looking for their next Southampton home, but when they see it on the portals (Rightmove, Zoopla, Boomin, OnTheMarket etc.) the properties are gone within days.

With demand at an all-time high, many Southampton home buyers are in a state of misery as Southampton house prices have grown in the last few years, forcing many of them to review their plans.

They are victims of the ‘for sale board crunch’ in the Southampton property market, the likes of which have not been seen since 2007.

Normally when there has been excess demand in the residential sales market, that frothiness has been taken care of by people moving into rented accommodation. However, the number of Southampton properties available to rent is at a 15-year low.

So why is the Southampton property market this way?

Demand for Southampton homes has exceeded the number of properties for sale since the general election in December 2019. After years of long drawn out Brexit negotiations, homeowners and buyers were more confident about their move. Many Southampton people who put their home move on hold in 2018/19 had more confidence to return to the market.

The first lockdown in the spring of 2020 did nothing to quell this pent-up urge, and since the late spring of 2020, the Southampton property market has been on fire! The lockdown changed what homeowners were looking for in their Southampton home. Proximity to public transport dropped down the wish list for buyers, and demand for apartments dropped. Whilst properties with larger gardens and rooms that could double up as home offices tended to be at the top of most Southampton buyers' wish lists.

 

Around 36% more Southampton properties have sold in the last 18 months than the long-term 20-year average.

 

Looking at the supply side of the equation, in the last five years, an average of 204,410 new homes per year have been added to the number of properties available in the UK. Also, 239,600 properties came back into the market when they became available after their owners had sadly passed away. Yet still, that isn't enough. The country needs at least 300,000 new dwellings to keep pace with demand.

There is also another problem that has come to light with the cladding issue of apartments. Just over three-quarter of a million apartments have issues with cladding. Whilst these are being sorted out (which will take many years), they are essentially unsaleable unless a fire safety expert on these buildings signs them as safe.

These cladding issues prevent these apartments from coming onto the market (thus reducing the supply of properties to buy). It also precludes their owners from moving up the property ladder from their apartment to a house. Also, many first-time buyers who can save a bigger deposit or be gifted cash from the Bank of Mum and Dad are skipping the apartment as their first home and going straight for a house, thus intensifying the lack of larger properties for sale.

 

So, how long does it take to sell a Southampton property now?

 

Southampton Apartments – 69 days

Southampton Terraced / Town House – 19 days

Southampton Semi-Detached – 19 days

Southampton Detached – 30 days

This means it is a seller’s market in Southampton, empowering them to push up their asking prices in high demand areas. However, most sellers are also buyers, which means the advantage they have on selling their property is turned on its head when they come to buy.

Many Southampton sellers prefer to find their future Southampton home before putting their current home on the market. That is making the lack of properties on the market seem even harsher than it may otherwise be.  

 

The ‘for sale board crunch’ would be somewhat eased if Southampton sellers put their property onto the market whilst they were hunting for their next ‘forever home’.

However, not all Southampton homeowners are doing so, partially because they (wrongly) believe they will be made homeless if they find a buyer and can’t find another property to buy (remember, you are not legally committed to moving until exchange of contracts).

A big issue will be finding a suitable Southampton home. We very much have a chicken and egg scenario. Some homeowners are waiting for the right property to come onto the market before they put their home on the market. This will probably mean that the Southampton property will sell even before the photographs have been taken of your home.  

Yet, many Southampton homeowners are worried if they put their house on the market and it sells, they won’t be able to find another suitable home and thus be homeless.

 

Classic chicken and egg – so what do you do first?

There is another way of doing this. It's a technique estate agents used to use before the internet, and it's called 'chain building'. Many Southampton homeowners are contacting me to move home yet don't want to be made homeless. What we do is slowly build a group of people in a chain over many months. It requires a lot of patience to build a chain downwards and upwards around you.  

There is no cost to this and no legal commitment to go through. It can take six, even twelve months to build a chain of people who are prepared to wait for the chain to form.

 

Yet, everyone normally gets their next 'forever home'

by playing this long game.

 

Because if you don’t play the long game, build relationships with Southampton Estate Agents (who can build these chains) and only rely on waiting for properties to appear on Rightmove, Boomin, OnTheMarket or Zoopla, you will be sorely disappointed.

 

According to national research from Denton House Research, 7 out of 8 people who viewed a house through an estate agent in 2021 were not on the mailing list of that agent before they viewed it.

 

That means all these Southampton properties built on a chain builder (as above) will sell, yet won't appear on Rightmove or Zoopla, meaning you will miss out. 

 

You must get yourself on the mailing list of our estate agency (and other agents if they do this chain building) so you don’t miss out on your next forever home in Southampton. 

 

If you would like a chat about anything mentioned in this article, feel free to drop me a message or call me.

 

5,883 Southampton Landlords Could Be Hit With £14k Bills and Red Tape in Tory 'Levelling Up' Plans

 

·         Some Southampton landlords face bills of between £11,000 to £14,000 as Michael Gove, the Housing Minister, declared an attack on poor quality private rental homes.

 

·       5,883 Southampton rental properties will require upgrading. The Government announced in their ‘Levelling Up’ White Paper last week they plan to introduce a new minimum standard for private rental properties.

·       Also, the White Paper wants every landlord in Southampton (25,247 of you) to go on a Landlord Register and proposes the removal of Section 21 no-fault evictions. This could make it more difficult for you to get possession of your Southampton rental property.

·       Are these proposed changes another nail in the buy-to-let coffin for Southampton landlords?

On the face of it, yes, it could be seen as another attack on the humble Southampton landlord, having to spend money on their properties and get tangled up with red tape on a register and then having no-fault evictions removed.

 

Yet, as always, the devil is in the detail ...

 

This ‘Levelling Up Bill’ is a White Paper. White Papers are policy documents created by the existing Government that set out their future proposals for legislation. Many White Papers don’t even make it to the House of Commons to be debated on, and even then, it needs to be voted on by both Houses of Parliament before becoming law. Any changes are at least two or three years away, and that’s assuming that it gets debated and subsequently approved.

 

Many have said the White Paper is supposed to lay out how to sort the challenge of rebalancing the UK economy that is suffering from the highest level of regional inequality than any G8 country. This is a gargantuan challenge …

 

yet the Levelling Up White Paper reads very much like a shopping list of great ideas without the means to pay for it.

 

One of the 12 points in the White Paper was focusing on housing, with a plan to introduce a new minimum standard for rental properties, a landlord register and the removal of no-fault evictions (as an aside, there was also a mention of a possible reintroduction of Home Information Packs - remember those from 2009!).

 So, what does this mean for the landlords of the 25,247 private rental properties in Southampton?

Sub Standard Rental Properties

The proposed changes will mean rental homes in the private sector will have to meet two specific standards that the existing 23,373 social housing homes in Southampton currently need to meet.

The first being called the ‘Decent Homes Standard’ (DHS) and the second, the Housing, Health and Safety Rating System (HHSRS) evaluation.

Looking at data from the Government, there are 5,883 private rental properties in Southampton that are considered substandard under these two measures and each one would cost between £11,000 and £14,000 to bring up to the prescribed standard. That means ...

the estimated total cost to improve the 5,883 Southampton properties, that are considered substandard, could be as high as £82,355,714.

 

All of that would have to come out of the pockets of Southampton landlords!

Yet both systems of standards (DHS & HHSRS) have been slated by many (even by the Government itself).

The DHS criteria for the standard are as follows:

1.      It must meet the current statutory minimum standard for housing

2.      It must be in a reasonable state of repair

3.      It must have reasonably modern facilities and services

4.      It must provide a reasonable degree of thermal comfort

Note how the word ‘reasonable’ is used in three of the four points of the DHS. Reasonable is an arbitrary and a very much subjective point of view. It screams loopholes and get out clauses to me.

Looking at the HHSRS, the Government announced just before the pandemic in June 2019 that the HHSRS would be revamped after it was found to be ‘complicated and inefficient to use’.

Putting aside how one measures the standards, it is a simple fact that there are many Southampton rental properties that are substandard. I believe it right the Government have an ambition to halve the number of sub-standard private rentals by 2030. However, would it surprise you that …

 

in 2006, 46.7% of private rented homes in the UK were classed as substandard and today that has reduced, without any legislation, to 23.3%. One must ask if new legislation is now required?

Also, if you recall in an article I wrote recently (drop me line if you would like me to send it to you), Southampton landlords will be faced with bringing their properties up to an energy rating (EPC) of C between 2026 and 2028 in legislation already announced.

Most of the works to meet that EPC rating requirement will be the same works to meet this new DHS and HHSRS. Also, in that article, I discussed how the Government have suggested that certain allowances will be made for landlords on rental properties that can’t be improved.

So, I think Southampton landlords should sit tight and let the Government shine more light on this in the coming months before any knee jerk reactions are made.

Landlord Register

To be honest, there are several city/borough registers around the UK for landlords. Experience has shown they seem to add an extra level of bureaucracy and red tape. The register would be for every Southampton buy-to-let landlord and rogue landlords would be struck off whilst allowing tenants new redress rights. Another reason to employ the services of a letting agent to manage your property! 

End of No-fault Evictions

Again, I spoke about this a few weeks ago with the proposed removal of Section 21 to evict a tenant (again, if you want a copy, drop me a line). If you recall, I stated that no-fault evictions were removed in Scotland over four years ago and the apocalyptic suggestions it would kill the rental market for Scottish landlords was not forthcoming. Now of course, the Scots strengthened the other grounds to evict a tenant. If the Government strengthen the Section 8 legislation, again, I cannot see this being an issue south of the border. Again, time will tell once the Government put more meat on the bones of the White Paper.

Conclusion

 

Many of the announcements made in the Levelling Up White Paper are re-hashed proposed legislation that has been on the books for the last couple of years.

This White Paper is not another nail in the coffin of buy-to-let in Southampton.

 

Yet, many commentators have cautioned that more landlords with substandard homes will sell up because of these proposed changes, warning the sell up would add to the private rental sector's shortage of homes, thus pushing up rents.

 

If that was true, that would increase rental returns on Southampton buy-to-let and attract more Southampton landlords into the sector, wouldn’t it?

But if you don’t agree other Southampton landlords will buy these rental properties that other landlords are selling, who will buy their Southampton properties from them? It will be Southampton renters, who are now able to buy because the price has come down, meaning equilibrium should return to the market. 

This is all theoretical and there are shortages/gluts in specific locations. Let us not forget it was 12/18 months ago that rents were dropped by double digit percentage points in the space of a couple of months in the big cities. Those rent drops weren’t anything to do with landlords buying up City Centre rental properties, but demand plummeted with 20 something tenants moving back in with their parents during the first lockdown and the months that followed. Yet, now rents have bounced back to pre-pandemic levels (and more) with the return of tenants to the cities.

In a nutshell, if Southampton landlords do end up selling in their droves (which they won’t), yet if they do, those Southampton properties will still exist.

Few of them will be left empty because most of them will be bought by other Southampton landlords as they will be attracted to the sector as inflation takes hold whilst others will be bought by first-time buyers.

What goes around, comes around. So, let’s see what happens in the coming months. In the meantime, if you’re a Southampton landlord and you want to discuss anything in this article, please either drop me a line or send me an email.

23,311 Southampton OAP Homeowners Could be Forced to Sell Their Homes as Their Energy Bills Rise

·         Will Southampton OAP homeowners be forced to sell their home as their gas & electric bills are set to double in 2022?

·         What can the 23,311 Southampton OAP homeowners do to mitigate this?

·         What are their options if they do need to sell? And what will that mean for the Southampton property market as a whole?

The wholesale gas price has tripled in 2021. Even if you aren’t on gas at home, half the UK’s electricity comes from burning gas so, this affects everyone. Even though domestic bills have been protected from the majority of this with the Government’s price cap, energy bills will rise by at least 50% in April. This means the average energy bill will rise by £60 per month in the spring, thus producing a potential cost of living crisis.

 

Why have gas and electric bills increased so much?

The cost of gas (and indirectly electricity) rose during 2021 due to a number of reasons, and the troubles are worldwide rather than exclusively affecting the UK.

To start with, the winter of 2020 was very cold in Central Europe, which increased demand for gas and used up many European countries’ stored gas supplies, whilst demand for gas also swelled in China and the Far East. On the supply side, many European countries rely on Russia for its gas, yet Russia’s supply of gas was lower than expected.

 

When will gas and electric prices rise?

The Government have an energy price cap which is the maximum amount your gas and electricity supplier can charge you. The energy price cap is set by Ofgem every six months, and the most recent review was completed on the 3^rd  of February. The increases will only be introduced from the 1st of April 2022.

The existing energy price cap is £1,277 (for an average UK home), which was set in the summer of 2021 (and that was a 12% rise on the previous cap). The latest increase in the price cap will add around 50%  onto energy bills, meaning the cap will increase to just over £2,000 per annum.

That means there will be a lot of Southampton people who will struggle to afford the increase in energy prices.

Some have suggested the Government should remove VAT from gas and electricity bills for a year, yet that would only save them around £100 a year – but it’s still £100!

Southampton OAP’s will be one of the hardest hit by these gas and electricity hikes

For those pensioners who reached state pension age after 2016, their state pension will rise in April by £5.55 per week or £288.60 a year. Considering their energy bills will rise by at least £720 a year, together with the underlying inflation for goods and services rising at 5.4% on top, this will mean many OAP homeowners will have to make a difficult choice.

 

So, what is the scale of the problem in Southampton?

 

1 in 7.47 people in Southampton is an OAP

Of the 245,072 population of Southampton, 32,828 of them are 65 years or older, and of those, 23,311 own their own home.

However, as I have discussed several times in my Southampton Property Blog, many of those older Southampton homeowners are still in their original family homes even though their children have flown the nest.

They are living in large 3- and 4-bedroom homes with lots of rooms that require heating, even though they are not being used. To give you an idea of the difference of costs:

 

• ·        The average Southampton one/two-bedroom home’s energy bills will rise from £795 per year to £1,435 per year.
• ·         The average Southampton three-bedroom home’s energy bills will rise from £1,163 per year to £2,104 per year.
• ·         The average Southampton four-bedroom home’s energy bills will rise from £1,638 per year to £2,936 per year.

Therefore, I predict there will be an uplift in the number of mature homeowners in Southampton moving forward their downsizing plans throughout 2022/3 as they look to reduce their outgoings. The downsizing will also reduce other outgoings like their council tax and building insurance premiums.

Of course, many mature homeowners will make other choices. This could be a great time to look at other forms of heating like ground source heating and solar panels to reduce one’s dependence on energy from the National Grid.

You could ask a local Energy Assessor to perform an energy audit on your home by tasking them for an Energy Performance Certificate. If you need to know the name of a decent Southampton Energy Assessor, drop me a line or pick up the phone.

 

So, if downsizing is an option, what will that mean for you and the local Southampton property market?

A big issue will be finding a suitable home to move to. We very much have a chicken and egg scenario now as waiting for the right property to come on to the market, before you put your home on the market, will probably mean that your ideal property will sell even before the photographs have been taken of your home.

Yet, many Southampton homeowners are worried if they put their house on the market and it sells, they won’t be able to find another suitable home and thus be homeless? Classic chicken and egg – so what do you do first?

There is a third way of doing this ... good old fashioned ‘chain building’. I have many mature Southampton homeowners that are contacting me to move home, yet don’t want to be made homeless. What we do is slowly build a group of people in a chain over many months. It requires a lot of patience to build a chain downwards and upwards around you.

There is no cost to this and no legal commitment to go through. It can take six, even twelve months to build a chain of people who are prepared to wait for the chain to form ... yet by playing the long game, everyone gets their next ‘forever home’.

The long-term advantage to everyone else is that a new supply of larger homes will be put onto the market in Southampton. Yet, if you are going to rely on waiting for these properties to appear on Rightmove or Zoopla, you will be sorely disappointed.

According to national research from Denton House Research, 7 out of 8 people who viewed a house through an estate agent in 2021 were not on the mailing list of that agent before they viewed it. That means all these properties built on a chain builder (as above), will be sold, won’t appear on Rightmove or Zoopla, meaning you will miss out.

You have to get yourself on the mailing list of our estate agency (and other agents if they do this chain building) so you don’t miss out on your next forever home in Southampton.

 

Southampton Homeowners Pocketed £191k Each in the Last 20 Years

    -    The average house price in Southampton has increased by 144.0% to £322,700 in the last 20 years, a profit of £190,500

    -    That means, when adjusted for inflation in those two decades, Southampton house prices have risen in real terms by 71.9%

    -    What does this mean for existing Southampton homeowners and first-time buyers trying to get on the Southampton property ladder?

Since 2001, UK average house prices have risen by an astonishing 187.2% across the UK, while in London the figure is 247.6%.

Looking back at the people that bought in those first few years of the new Millennium, few of those buying or selling property in 2001 could have forecast the massive financial impact that their decision then would have on the rest of their lives.

In those years, there have been winners and losers, where some Southampton buyers have made hundreds of thousands of pounds and Southampton renters have paid out tens of thousands of pounds and yet been unable to buy their first home – but life is often not as simple as that, so in this article I wanted to discuss the matter further.

The average house price in Southampton has increased by 144.0% to £322,700 in the last 20 years, a profit of £190,500.

Now of course these are average prices and don’t take inflation in to consideration.

Yet even when adjusted for inflation, Southampton house prices have still risen by 71.9% in the last 20 years.

Characteristically, the longer a homeowner has owned their Southampton property, the larger the gain when they sell. Yet most of these profits are never seen by Southampton homeowners. It has never been money in the bank unless you sell up and downsize or move somewhere cheaper. Instead, these gains are re-invested back into the housing market when they buy their next home.

So, whether the gains are banked or tied up in their bricks and mortar, it looks like all the Southampton homeowners are in the driving seat. 

What about all the Southampton first-time buyers, priced out of the market and unable to get on to the property ladder?

Are the young of Southampton losing out again?

Reading the newspapers you would think so, yet nothing could be further from the truth. In fact …

 It’s 22.8% cheaper today to buy a house in Southampton compared to 2007

 That isn’t a typo!

In 2002, 28.4% of a first-time buyer’s household income went on the mortgage payments. Today, that figure stands at 37.7%, yet in 2007, it was 48.8% ... hence why it’s cheaper today!

Of course, for most young Southampton potential first-time buyers, the other largest barrier to home ownership is the matter of raising an adequate deposit.

Rising rents (and future energy prices) won’t help and will in fact make this problem worse, giving ambitious Southampton first-time buyers not much left at the end of the month to save a deposit for their first home. 

With soaring Southampton house prices, this means the amount Southampton renters need to save for their deposit is growing year on year.

For these annoyed renters, there is the unpleasant irony that if they could only get on the Southampton housing ladder, they would find themselves better off. They would spend a lower proportion of their monthly take home pay on keeping a roof over their heads. 

Some people in the press have suggested the older generation, with all the equity tied up in their homes over the last 20 years, should release some of the money and give it to their children or grandchildren to help them on the ladder, maybe?

Reports in the press have also described many homeowners in their 60’s (and older) changing their plans to move home. Many were planning to downsize, to release the tied-up equity in their home. That equity would either be used to invest in the bank to produce an income for them and/or to help their children (sometimes even grandchildren) on to the property ladder.

Yet with the interest paid by banks and building societies on any lump sum being very low, to many mature homeowners it hardly seems worthwhile making the move to downsize. This means many younger would-be first-time buyers are missing out on help from the Bank of Mum and Dad (or the Bank of Grandad and Grandma) with their deposit.

However, the problems caused by low interest rates could also be their saviour.

Many older homeowners have turned to equity release, thus allowing them to get hold of a share of the equity amassed in their property, in exchange for a tax-free lump sum of cash.

Cash that could be used to help with deposits for their children/grandchildren?

The mature homeowner then stays in their larger family home and helps their family buy a property.

Whilst I am not a mortgage adviser (and you must take proper advice from a qualified mortgage broker), equity release mortgages don’t have end dates and the interest payments are rolled up (until you pass away). This means that there aren’t any monthly payments.

The interest rate you pay is normally fixed for the mortgage and because interest rates are so low, that means the debt shouldn’t balloon up. And should you decide to sell in a few years’ time, you just pay back the capital, redemption fee and the small amount of interest accrued.

Now of course, that does mean there will be less for your offspring to inherit when you pass away.

Equity release mortgages though have had some bad press recently.  In the past they were unregulated and pricey. Yet today, there is more protection for borrowers.

One answer to the growing interest debt is to pay part or all the monthly mortgage interest charged, yet you must have the income for that.

You also need to take advice on how the equity release will affect your liability for nursing home fees and inheritance tax. Also, if only one person in your home is the owner of the property, if that homeowner dies, the partner who is not on the mortgage (because only owners can go on a mortgage) won’t have any rights to stay in the family home. 

Finally, if you are planning to move, don’t just compare the interest rate, but the redemption charge for early repayment – some of them can be very high.  

My advice – take professional advice and speak to your family and involve them. Yes, we have all built up some amazing equity in our Southampton homes, and yes, there is potential to help the younger generations with that wealth. Just go in with your eyes open and know all the facts, all the pros and all the cons – then decide what is best for you with all that information to hand.

What are your thoughts, as a mature Southampton homeowner or a first-time buyer, on this? It would be good to hear from you.