The Untold Story of Southampton’s Terraced Houses

 

Call me old-fashioned and nostalgic, but I am fond of terraced houses.

I've conducted some research that my fellow readers of the Southampton Property Market Blog will find intriguing!

Architecturally speaking, the terraced or townhouse has been prevalent in the UK since the late 1600s. It involves a row of symmetrical houses that share side walls.

The credit for the first terraced houses goes to Monsieur Barbon, a Frenchman who constructed them around St. Paul's Cathedral during the rebuilding phase after the Great Fire of London in 1666.

Interestingly, the French invented the terraced house concept around 1610-15 in the Le Marais district of Paris, featuring planned squares and properties with identical facades. However, it was during the 1730s that terraced houses truly flourished in London and, of course, in Bath with the magnificent Royal Crescent.

Let's focus on Southampton.

 

Many of our terraced houses in Southampton were built during the Victorian era.

 

Terraced houses emerged as a response to the Industrial Revolution, as people flocked to towns and cities for employment.

Terraced houses provided decent, habitable accommodation, offering an escape from the slums.

Interestingly, most Southampton Victorian terraced houses followed a standard design: a ‘posh’ front room for high days and holidays, a back reception room where the family resided daily, and a scullery attached to it (scullery - a small kitchen at the rear of a house used for washing pots and other dirty household work). Off the scullery, there was a door leading to a rear yard where you would traditionally find the privy or outside toilet! There were two good sized bedrooms upstairs, with a smaller third bedroom (or nursery) accessed directly through the second.

Notably, in 1875, the Public Health Act mandated that each house should have 108 square feet of liveable space per main room, access to running water, an external toilet/privy and rear access for waste collection (as there were no public sewers in Southampton at that time, at least not where these "workers'" terraced houses were built).

During the 1960s and 70s, an indoor WC and a bathroom were installed (often in that third bedroom or as a ground-floor extension of the scullery). In the 1980s, gas central heating became prevalent, and since then, there has been a continuous replacement of uPVC double glazing.

Two-storey terraced houses started to be built again in the 1960s, yet they were marketed as 'townhouses’. Since the early 2000s, with the price of building land rising so quickly, new homes builders started to build three-storey townhouses.

 

The humble terraced/townhouse neverseems to go out of fashion!

 

Looking at the makeup of all the Southampton properties, some fascinating numbers appear.

Of the 102,293 households in Southampton …

 

13,291 are detached properties

26,344 are semi-detached properties

20,089 are terraced/townhouse properties

42,476 are apartments/flats

 

… the rest being made up of caravans and mobile homes.

 

Next, looking at the percentage compared to the national average is interesting.

 

13.0% are detached properties (national average 26.1%)

25.8% are semi-detached properties (national average 31.4%)

19.6% are terraced/townhouse properties (national average 22.5%)

41.6% are apartments/flats (national average 20.1%)

 

So how has the Southampton terraced house risen in price?

 

The average price for a Southampton terraced house in spring 1995 was £50,727. Today, that figure stands at £249,463, a rise of 392%.

 

Not bad when you consider the overall average in Southampton during the same time frame has only risen by 369%.

Terraced houses in Southampton often go unnoticed by buyers, despite offering flexible and sizeable accommodation. It's time to shed light on the untold story of these charming homes. If you're thinking of selling your terraced house and want to ensure you get the best price, look no further. As an experienced estate agent specialising in Southampton properties, I'm here to offer you expert advice tailored to your needs.

 

Remember to consider the potential of the terraced house.

 

These properties have a rich architectural history and have provided significantly more habitable accommodation for generations. From the standard Victorian design with its distinct rooms and rear yard to the modern-day improvements of indoor facilities and central heating, from the second coming of the terraced house in the last 50 years with the ‘townhouse’, Southampton's terraced houses have continually evolved to meet the needs of their residents.

Call me if you're ready to sell your terraced house and want to maximise its value.

As a local estate agent, I deeply understand the Southampton property market. With my expertise and personalised guidance, we can navigate the selling process together, ensuring you achieve the best possible outcome.

Contact me today to unlock the full potential of your Southampton terraced house and secure a successful sale!

14 Reasons Not to Fear Southampton House Price Drops

 

The Southampton property market experienced a boom between the summer of 2020 and late summer of 2022, fuelled mainly by pandemic-induced trends such as the stamp duty stimulus, low mortgage rates, the race for space, and the rise of remote working.

2023 has presented a different story for the Southampton housing market, with cooling demand, rising mortgage rates, and declining home sales from the previous two years.

Many Southampton homeowners are now concerned about a possible fall in Southampton home prices, as the newspapers predict a housing recession. Nonetheless, there are several reasons why homeowners should not fear Southampton house price drops.

This article will explore 14 key factors that can provide reassurance in uncertain times.

 

1.   Strength of the Southampton Job Market

The job market is crucial in determining home prices, directly impacting income levels. Fortunately, the Southampton job market remains robust, with unemployment hovering near all-time lows of just 3.6%. Labour shortages are currently a more significant concern than a lack of job opportunities. As long as the job market remains stable, Southampton home prices should be firm and prevent substantial house price falls.

 

1.      2023 is Different to 2008

Comparing the current Southampton housing market to the 2008 Credit Crunch reveals significant differences. The housing bubble that led to the crisis was primarily driven by subprime mortgages in the USA, resulting in a wave of defaults. This spread to the UK, and banks stopped lending to each other (and mortgage borrowers).

Today's Southampton property market differs significantly for four reasons.

Firstly, Southampton homeowners have built substantial equity in their properties since 2008. Secondly, many Southampton homeowners with a mortgage have taken advantage of re-mortgaging at lower fixed rates during the pandemic meaning they are immune to the recent hike in interest rates. Third, the banks are prepared to lend money, unlike 2008 when there was a severe lack of credit as banks weren’t prepared to lend money. Finally, the Bank of England in 2014 told lenders to stress test every mortgage application up to 6% or 6.5% mortgage rates. These four points have reduced the threat of widespread defaults, even if the UK economy were to enter a recession.

The Long Game of Southampton Homeownership

Most Southampton homeowners view their household as more than a house; it's a home. It’s more than just a financial asset; the home represents a lifestyle choice. Despite potential house price declines over the next few years, Southampton homeowners' long-term perspective should remain intact. Throughout British history, home prices have always appreciated over time, even after the financial crisis of 2008.

Southampton homeowners who held onto their properties during the Credit Crunch eventually saw Southampton house prices return to their pre–Credit Crunch 2007 peak by July 2014.

 

…and here is where playing the long game is so important in the Southampton property market.

 

Since July 2014, £78,181 has been added in additional equity to the average Southampton home.

 

It’s so easy to fixate on the short term and forget the medium to long terms gains made by property.

 

4.     Inflation is Good News for Southampton Homeowners and Landlords

While inflation may be a cause for concern in various aspects of daily life, it can benefit most homeowners (and landlords). Inflation often leads to increased house prices and reduces any mortgage's 'real' value, thus acting as a hedge against rising costs. Higher wages resulting from inflation will improve affordability, thereby supporting home prices. The key is avoiding inflation leading to a full-blown recession, which could negatively impact the housing market.

 

5.     Positive Implications for Going Upmarket

A national home price decline can be good news for homeowners looking to move up to a bigger or more expensive property. Such a decline would reduce the price gap between selling their home and purchasing the next one.

For example, if you were planning to move from a £300,000 Southampton home to a £500,000 Southampton home today, excluding moving expenses, it would cost you an additional £200,000 to move home. Let's say, for example, Southampton house prices dropped by 10%, the £300,000 house would be reduced to £270,000, and the £500,000 house would be reduced to £450,000, meaning the gap between the two would only be £180,000 – thus saving you money!

 

6.     Persistent Housing Shortage

The national housing shortage, which originated during the financial crisis when homebuilders scaled back construction, remains a significant factor in supporting home prices. Analysts estimate that the market needs to add around four million new homes to meet current demand fully. Given the cooling of the market and rising mortgage rates, homebuilders are still cautious about increasing construction. As long as the housing shortage persists (which it will without an additional 2 million homes being built), it should help sustain home prices.

 

7.     Southampton Rental Market Dynamics

Soaring rental prices, another consequence of inflation, are another reason for homeowners to be content with their current ownership status. Homeowners with fixed-rate mortgages enjoy the stability of locked-in monthly mortgage payments. In contrast, Southampton renters face challenges with rent increases of 10% or even 20% per annum on new properties coming onto the market (some types of properties) due to the ongoing lack of properties to rent. The rise in rental prices is encouraging more Southampton people to consider homeownership, maintaining demand and supporting property prices.

 

8.     Anticipated Mortgage Rate Reduction

While recent rate hikes from the Bank of England have affected the housing market, there is an expectation of easing in the near future. According to the money market's latest forecasts based on the 5-year swap rate, the Bank rate is projected to fall in early 2024. A decline in the Bank of England rate would lead to a decrease in mortgage rates. If the economy remains stable during that period, declining mortgage rates could support house price growth.

 

9.     Expected Moderate Decline

Economists generally predict that any potential home price decline will be modest. With the current support from the housing shortage, inflationary trends, and well-capitalised mortgage owners, a moderate single-digit decrease is more likely than a severe crash like 2008. Such a moderate decline should be less intimidating for Southampton homeowners.

 

1   Potential for Renovation Costs Dropping

The demand for home improvement during the pandemic led to a surge of 41.9% in construction materials in the two years after lockdown. However, in the last 12 months, overall building costs have fallen by 1% (despite inflation). Some notable drops include timber dropping 27.6% over the previous 12 months, although cement is up 13.7%. Price reductions in new construction might lead to even more easing of renovation costs. The trajectory of renovation costs will depend on the housing market and broader economic conditions.

 

1   The Property Market Loop of Recovery

If home prices were to fall, it would likely be driven by weakened homebuyer demand rather than an oversupply of homes. Such a decline would indicate an economic slowdown or recession, prompting the Bank of England to respond with interest rate cuts. Lower interest rates would subsequently reduce mortgage rates, giving homebuyers a boost in affordability and ultimately contributing to the market's recovery.

 

1   House Price Drops Only Affect You if You Sell

A decline in Southampton home prices might psychologically impact homeowners, even though it may not affect them directly if they do not plan to sell soon. House prices can only affect you if you are moving. 96.54% of homeowners will still be in their homes in 12 months, so they won't lose money if the property market dips. Price change only affects those looking to buy and sell. Don't be held hostage by market trends - know when to buy and (just as importantly) when to sit tight.

1   Actual Value of Homeownership

The pandemic has brought heightened attention to the value of homes, with widespread discussions on the housing market and price speculations. However, Southampton homeowners' connection to their homes goes beyond financial considerations. It is often rooted in the relationships shared with loved ones, the sense of community, the peace of mind derived from home ownership, and the efforts invested in the property. The true value of homeownership transcends mere monetary figures.

 

1   The Rarity of Prolonged Price Declines

Prolonged home price declines lasting five-plus years, especially those as severe as the early mid-1990s-era housing bust, are infrequent. Throughout the last century, national home prices have only declined occasionally and typically required unique combinations of events. While recent price surges have led to speculation about a potential decline, numerous market tailwinds and the reasons above should prevent a sharp plunge and potentially avert any significant house price crash.

 

But what if Southampton House Prices do Drop?

 

Ignoring the 14 points mentioned above, let us see what a price reduction would mean for Southampton homeowners.

The peak of the property market (just before the Credit Crunch hit) in our local authority area of City of Southampton was November 2007, when the average value of a property was £168,795.

The Southampton property market bottomed out in March 2009 when Southampton property prices dropped to £134,665 (a drop of 20.2%).

Today, the average property in Southampton and the local authority area stands at £246,976.

So, if Southampton house prices dropped by 10% (to £222,278), they would only return to the levels that were achieved in Southampton in August 2021 … and nobody was complaining about those!

Now, don't get me wrong, if house prices drop by 10%, a tiny percentage of homeowners (2.83% of all homeowners that have bought in the last two years) will be in negative equity.

However, that is only an issue if they decide to sell the property, and as we all know, homeownership is a long-term thing, and most of those who would have negative equity will probably be on five-year fixed-rate low-rate mortgages.

But what if Southampton house prices dropped by the same percentage (20.2% as mentioned above) as they did in the global financial crash in 2008? If that were the case, Southampton house prices would only return to the house price levels achieved in July 2016 (although the number of people in negative equity would increase slightly).

As Southampton homeowners face uncertainty regarding potential house price drops, it is crucial to recognise the various factors that support the housing market's resilience. While economic conditions can fluctuate, history has shown that housing values tend to appreciate over the long term.

Southampton homeowners can take comfort in the differences between the 2023 market and the 2008 housing bubble, including stronger equity positions and a more regulated lending environment.

As we navigate through market cycles, Southampton homeowners should remain focused on their long-term goals, the strength of the job market, and the true value that their homes bring beyond monetary considerations. By acknowledging these factors, Southampton homeowners can confidently approach potential price declines and adapt to the market.

These are my thoughts, what are yours?

Southampton Rents Smash Through the £1,120 Barrier .........Are Southampton Landlords Profiteering?

 

The private rented sector for both Southampton landlords and Southampton tenants is facing immense challenges, with a shortage of available homes for rent putting renters under significant pressure.

And you can see why when the average UK rent in 2021 was £1,381 and in 2023 it has been £1,706, an increase of 23.53%.

Let’s look closer to home in the Southampton area.

 

The average rent for homes coming on the market in the Southampton area in 2021 was £919 per month, whilst in 2023, it has been £1,128 per month.

(Southampton area SO14 to SO19).

You can see why people are accusing landlords of "widespread profiteering".

But as always, the devil is in the detail.

 

This increase in average Southampton rent is for new tenancies, not tenancy renewals.

 

A new tenancy is when a brand-new tenant moves into a home, whilst a renewal is when an existing tenant renews the lease with their existing landlord.

Government data shows that most landlords are not exploiting the mortgage crisis, with 64% of landlords maintaining and 4% decreasing rents to shield renters from the impact on renewal of their tenancy agreement, dispelling the notion that they are exploiting the situation.

Looking at the same Government data, of the landlords setting rents for new tenants, just under half of landlords (45%) stated they increased the rent compared to the previous tenancy with the old tenant, whereas a third (35%) kept the rent they charged at the same level, and surprisingly 1 in 12 (8%) decreased the rent.

 

Therefore, whilst the average percentage growth in Southampton for new tenancies is 22.7%, the overall average for all tenancies is only 4.6% for Southampton.

And 4.6% is much lower than the rate of inflation.

Contrary to popular belief, landlords' profit margins have significantly dwindled in recent years. The profits for private landlords are at their lowest since the Credit Crunch due to rising mortgage rates and limited tax relief. This demonstrates that private landlords are not profiteering during the cost-of-living crisis.

Now some of you will say, Southampton house prices have risen in that time. Yes, that is the case, yet not by the rate of inflation, so in fact in ‘real’ terms, their investments have gone down in value.

 

Landlords are often portrayed negatively in the media but are in fact making considerable efforts to provide safe and secure housing for millions of tenants.

 

Landlords face growing costs, including increased mortgage payments and the negative impact of a tax system that discourages investment in the rental market. These challenges are further exacerbated by ongoing uncertainty surrounding reforms to the law regarding landlords.

With limited options available, landlords must choose between leaving the private rented sector, increasing rents as a last resort, or absorbing mounting costs. However, the latter is nearly impossible for most individual landlords who lack deep pockets. To address these challenges, the Government must provide crucial support to the rental market.

To alleviate the burden on renters, the Government should reconsider current taxes which are designed to discourage landlords from providing more rental homes. It is vital to ensure that the supply of rental properties does not further diminish, as Southampton tenants simply cannot bear the consequences of a dwindling market and it will lead to further housing hardship.

 

Without proper government support, both renters and landlords will continue to face challenges, caught between a rock and a hard place.

Housing is such an important thing (rather like the NHS), and I would urge all parties, to move beyond rhetoric and take positive action to support the private rented sector.

 

I know many Southampton landlords who are making sincere efforts to shield Southampton renters from the mortgage crisis, and it is crucial their contributions are recognised.

 

By fostering an environment that encourages investment and providing support to renters, the Government can help alleviate the strain on both landlords and tenants and ensure a sustainable and fair rental market for all.

These are my thoughts, what are yours?