Southampton Property Market: Which homes are selling the best?

 

Inflation, interest rates, house prices down, house prices up ... the newspapers are full of column inches on Brit’s second favourite topic - the property market (the first being the weather obviously!).

Those of you that read my articles on the Southampton property market know I like to look further afield to compare the Southampton market with the regional and national markets. The one thing that is immediately apparent is that the UK does not have one property market.

House prices are up in one region of the UK, yet down in another. It is a hotchpotch patchwork (almost like a fly’s eye) of lots of small property markets all performing in different ways.  

… and that made me think …

Is there just one Southampton property market or many?

So, I decided to dive into the dynamics of the Southampton housing market, to see if it operates as a singular entity or if the diverse price ranges significantly influence a property's saleability.

This curiosity stems from the observation that properties, much like a spectrum, range from modestly priced to premium priced. Such variations in pricing could potentially carve out distinct segments within the market, each with its own trends and buyer behaviours. I decided the best way was to split the Southampton property market into four equal sized distinct price ranges, each representing a unique slice of the market.

Imagine the entire range of house prices as a four-layer cake.

The lowest quartile forms the base layer, representing the most affordable 25% of homes – these are typically the most accessible for first-time buyers and buy-to-let landlords. Next up is the lower middle quartile, the second layer, encompassing properties priced between the 25th and 50th percentiles. These homes offer a step up in features, style or location while remaining within a moderate price range.

Ascending further, the middle upper quartile, the third layer, includes homes priced between the 50th and 75th percentiles, appealing to buyers looking for more amenities or premium locations. At the top sits the upper quartile, the cream of the crop, representing the most expensive 25% of properties in Southampton. These homes are often luxurious, boasting high-end features and coveted locations, and are sought after by those who desire the best the market has to offer.

By segmenting properties into these quartiles, we gain insight into their saleability and can tailor strategies to target buyers effectively within each segment.

These are the quartile/house price bands for Southampton:

·       Lowest Quartile - (0 to 25% quartile in terms of value) - Up to £180,000

·       Lower Middle Quartile - (25% to 50% quartile in terms of value) - £180,000 to £270,000

·       Middle Upper Quartile - (50% to 75% quartile in terms of value) - £270,000 to £375,000

·       Upper Quartile - (highest 25% quartile in terms of value) - £375,000 upwards

So, having split the Southampton property market approximately into four equal sizes, the results in terms of what price band has sold (subject to contract or stc) the most is quite enlightening –

Southampton	Available	Sold STC	% Sold
up to £180,000	370	427	53.6%
£180,000 to £270,000	368	536	59.3%
£270,000 to £375,000	356	515	59.1%
£375,000 upwards	378	298	44.1%

 

The statistics across various price ranges present an interesting pattern. For properties priced up to £180,000, there are 370 available, with 427 already sold subject to contract (STC), representing a 53.6% sale rate.

In the next price band, £180,000 to £270,000, there are 368 properties available, with 536 sold STC, accounting for a 59.3% sale rate.

The £270,000 to £375,000 range shows 356 properties on the market, of which 515 have been sold STC, indicating a 59.1% sale rate.

Lastly, for properties priced at £375,000 and upwards, there are 378 available, with 298 sold STC, resulting in a sale rate of 44.1%.

The best performing price ranges/quartiles in the Southampton area are the lower middle quartile and middle upper quartile markets, with the upper quartile (the top 25%) range finding things tougher.

In analysing the Southampton property market, it's clear that the dynamics are multifaceted and cannot be neatly categorised under a single umbrella.

The market's behaviour is akin to a kaleidoscope, with each turn revealing a different pattern based on the price segment. This diversity in performance across various price bands/quartiles is indicative of a market that caters to a wide spectrum of buyer preferences and financial capacities.

The most illuminating insight from this investigation is the relative success of different price quartiles.

The lower middle and middle upper quartiles, encompassing homes between £180,000 and £270,000, have shown remarkable resilience, with a high percentage of properties going under contract.

In contrast, the upper quartile, representing the most expensive homes, faces a more challenging landscape. With a lower percentage of homes sold, this segment could be experiencing a slowdown, possibly due to its limited buyer pool or the broader economic factors affecting higher-end property investments and underlines the need for realistic pricing.

This disparity in market performance underscores the importance of understanding Southampton's property landscape through a segmented approach.

By recognising the unique characteristics and demand drivers within each quartile, estate agents, buyers, and sellers can make more informed decisions.

As a Southampton estate agent, this insight into the local market's nuances not only enhances our ability to advise clients but also reinforces our commitment to providing tailored solutions that resonate with the diverse needs of the Southampton community.

Embarking on the Landlord Journey: - Insights for Aspiring and Seasoned Landlords in Southampton

 

Property investment has long been a staple in British retirement planning.

The introduction of the buy-to-let mortgage over a quarter-century ago marked a significant turn, presenting opportunities for dual returns: rental income in the short term and capital growth in the long-term. You can see why there are a substantial number of Southampton landlords who view property investment as a cornerstone of their retirement strategy.

However, this path is full of challenges. Recent shifts in tax and regulatory landscapes, coupled with escalating interest rates, have imposed pressures on profitability, compelling some landlords to reconsider their positions. Thus, becoming a landlord in Southampton necessitates meticulous research and a strategic approach.

 

The Foundations of Buy-to-Let Mortgages in Southampton

A critical step in this venture is securing a buy-to-let mortgage, a process distinct from obtaining a homeowner loan. Lenders assess buy-to-let applicants based on an interest-coverage ratio (ICR), which demands that rental income meets or exceeds a certain percentage of the monthly mortgage interest (a minimum of 125% for standard taxpayers and 145% for higher-rate taxpayers). Additionally, many lenders require that buy-to-let borrowers have a minimum annual income outside of rental earnings to mitigate dependence on rental income.

Regarding the initial investment, a typical deposit hovers around 25% of the property's value. The borrowing landscape has experienced upheavals with the Bank of England's recent base rate increases. However, the average rate for a five-year fixed buy-to-let mortgage has witnessed a reduction in rates recently. For example, at the time of writing, HSBC has a 5-year BTL mortgage at 4.84% with a 75% Loan to Value (i.e. you put down a 25% deposit) with an arrangement fee of £1,999. Prospective Southampton landlords must judiciously consider these factors, evaluating the sustainability of their investment against potential interest rate hikes.

 

Understanding Costs and Preparations

The financial commitment extends beyond the deposit. Prospective landlords in Southampton should account for additional expenses like stamp duty, which includes a 3% surcharge for second homes. Furthermore, maintaining a contingency fund for maintenance and unforeseen rental voids is prudent. It's advisable to earmark approximately 1% of the property’s value annually for repairs and upkeep.

 

Navigating the Buy-to-Let Landscape

Investment in Southampton buy-to-let properties is not merely a financial decision but also an emotional one. Landlords must be prepared for the demands of property management, ranging from addressing maintenance issues to dealing with tenant-related challenges. The complexity of landlord responsibilities is underscored by over 150 pieces of legislation governing the sector, a figure poised to rise with impending regulations.

 

Demand & Supply of Southampton Rental Properties

The Southampton rental market has experienced a sustained period of significant rental inflation over the past few years. Despite that, Zoopla recently stated that demand for rental properties on its portal was 51% higher in Q3 2023 than the five-year average.

In the Southampton area (SO14 to SO19), the numbers of properties being let over the last six years are as follows.

In 2018, an average of 613 properties were let per month in the Southampton area.

In 2019, an average of 646 properties were let per month in the Southampton area.

In 2020, an average of 565 properties were let per month in the Southampton area.

In 2021, an average of 587 properties were let per month in the Southampton area.

In 2022, an average of 606 properties were let per month in the Southampton area.

In 2023, an average of 569 properties were let per month in the Southampton area.

 

 

However, even though demand is higher, the long-term supply of rental properties coming onto the market in the Southampton area has seen a slight decline.

So, we have increased demand and reduced supply, which can only mean rents will continue to grow as they have for the last couple of years.

This ongoing imbalance between supply and demand is a consistent characteristic of the rental market throughout all regions and countries in the UK. Currently, the annual rent growth rate in the UK stands at just over 10%. It's not good news for tenants, yet it still makes buy-to-let financially viable for most Southampton landlords, especially as interest rates have risen significantly in the last few years.

 

Rent Adjustments and Tenant Relations in Southampton

For landlords, understanding the regulations surrounding rent increases is crucial. These rules vary depending on the tenancy type, with periodic tenancies allowing for annual rent reviews. Ensuring transparent communication and fair practices in rent adjustments can foster harmonious landlord-tenant relationships.

 

The Eviction Process: A Delicate Matter

Eviction is a process governed by strict legal parameters. The anticipated changes in the Renters’ Reform Bill, particularly concerning Section 21 evictions, are set to alter the landscape, emphasizing tenant protection. Landlords must be well-versed in these regulations to navigate tenant eviction legally and ethically.

 

Conclusion: The Role of Expertise in Property Investment

Having a knowledgeable and experienced guide is invaluable in the intricate world of property letting. As a seasoned agent in Southampton, I offer a wealth of expertise and insight, making me and my team an ideal partner for both novice and experienced landlords

Whether navigating the complexities of buy-to-let mortgages, understanding the nuances of property investment in Southampton, or managing tenant relationships, our proficiency is a vital resource for anyone looking to explore or deepen their involvement in the property market.

In conclusion, the journey to becoming a landlord, especially in a market like Southampton, rewards careful planning, informed decision-making, and strategic foresight. With the guidance of seasoned professionals like us, Southampton landlords can navigate the challenges and complexities of the property market, ensuring their investment not only endures but thrives.

Navigating the Southampton Property Market: - The Art of Pricing Properties Right

 

As we stand at the threshold of 2024, facing economic uncertainties and a shifting housing landscape, the significance of correct pricing in Southampton's property market has never been more pronounced.

This comprehensive guide delves into the crucial aspects of property pricing and its profound impact on the property market transaction process.

 

Southampton's Property Market: A Brief Overview

Southampton's property market presents a unique blend of historical charm and modern appeal. The Southampton property market caters to diverse preferences, from classic village properties and 19th-century homes to contemporary modern homes, from terraced homes, apartments, flats, maisonettes, and detached and semi-detached homes. However, this diversity brings with it the challenge of accurately valuing properties. Various factors, including economic shifts, transport links, schools, demographic changes, and national housing trends, have influenced the local Southampton market. Understanding these elements is essential for setting a price that reflects the property's worth and market conditions.

 

The Risks of Overpricing Your Southampton Home

One of the most common pitfalls in property sales is overpricing. This mistake often originates for two reasons.

The first is an emotional attachment to the property or the owner's misinterpretation of the market, so the owner’s hopes are over inflated for the local property market (remember, buyers haven’t got the emotional connection you have for your home).

The second is when estate agents overvalue properties to attract homeowner business; it poses significant risks and consequences for the homeowners. This practice, often driven by the desire to secure a listing, can lead to a misleading perception of the property's actual market value.

 

Overpriced Southampton Properties Tend to Remain on the Market for More Extended Periods

When a property is overpriced, it leads to what's often termed as 'listing fatigue.' This stagnation can create a negative perception among potential buyers, who may assume there are unspoken issues with the property.

This stagnation not only diminishes the property's appeal but can also necessitate subsequent price reductions, which may cast doubt on the property’s condition or desirability in the eyes of potential buyers.

Moreover, a property lingering unsold due to overvaluation can disrupt the homeowner's plans, whether purchasing a new home or relocating.

I recognise for the homeowner, an overinflated price tag initially seems appealing. Yet, it ultimately results in a prolonged period on the market, as the property fails to attract buyers at this unrealistic level and sometimes you have to drop your asking price below the market value six/nine months later to get it sold.

All these scenarios underscore the importance of choosing a Southampton estate agent who provides honest, market-reflective valuations from the outset, ensuring a smoother, more efficient sale process and safeguarding the homeowner's best interests.

 

The Downside of Under-pricing Your Southampton Home

 

Conversely, under-pricing a property, although potentially expediting a sale, can result in substantial financial loss for the seller. Setting a price too low in a market where maximising returns is paramount can mean significantly under-realising your Southampton property's actual market value. This scenario underscores the importance of expert valuation that considers all aspects of the property, including its potential in the current market.

 

Striking the Right Balance for Your Southampton Home

Accurate pricing is a delicate art that balances understanding a property's intrinsic value and aligning it with market trends. It involves thoroughly analysing local Southampton market conditions, comparative property studies, and awareness of broader economic factors.

As a seasoned estate agent in Southampton, I bring a comprehensive understanding and in-depth knowledge of local markets to assist homeowners in accurately pricing their properties. This approach is not just about facilitating quicker sales; it's about ensuring that properties are sold at their rightful value.

There is no harm in ‘trying the market’ at a slightly higher price in the initial stages of marketing. Yet, if you are going to try a slightly higher price, it is so important to have this monitored on a weekly basis in the first four to six weeks of the property being on the market and making any necessary changes to the asking price around that time.

There is such a thing as a Goldilocks price reduction. It shouldn’t be too little or too much, just right, so it gives a strategic price reduction.

 

Southampton House Price Reduction Stats

In a competitive property market, a strategic price reduction can reignite interest in a property. When used judiciously, this tactic attracts more potential buyers, sparking renewed attention and leading to a quicker sale. By adjusting the price to align with market trends and buyer expectations more closely, sellers can effectively boost the appeal and visibility of their property.

The rule of thumb is that if you try a slightly higher price in the initial stages of marketing, do so, at most, for a few weeks/one month, then reduce it. But how much should you reduce it by?

As always, that comes down to your property and its standing in the market.

However, I wanted to share with you the level of price reductions in the Southampton area (SO14-SO19) over the last six years.

In 2018, an average of 2,003 properties were for sale in the Southampton area. Estate agents reduced, on average, 259 properties per month; thus, 12.8% of Southampton homes were reduced in price every month.

In 2019, an average of 2,143 properties were for sale in the Southampton area. Estate agents reduced, on average, 295 properties per month; thus, 13.7% of Southampton homes were reduced in price every month.

In 2020, there were an average of 2,215 properties for sale in the Southampton area during the year. Estate agents reduced, on average, 277 properties per month; thus, 11.9% of Southampton homes were reduced in price every month.

In 2021, an average of 1,780 properties were for sale in the Southampton area. Estate agents reduced, on average, 193 properties per month; thus, 10.9% of Southampton homes were reduced in price every month.

In 2022, there were an average of 1,458 properties for sale in the Southampton area. Estate agents reduced, on average, 187 properties per month; thus, 12.6% of Southampton homes were reduced in price every month.

In 2023 (to the end of November), there have been an average of 1,933 properties for sale in the Southampton area during the year. Estate agents reduced, on average, 310 properties per month; thus, 16.0% of Southampton homes were reduced in price every month.

 

As you can see, there has been a substantial increase in properties on the market and thus price reductions in the Southampton area the last year.

 

 

The average reduction of a Southampton home in the last tthree months has been 6.7%

 

Looking Ahead to the 2024 Southampton Property Market

 

As we advance into 2024, the Southampton property market, like many others, is navigating through a period marked by economic uncertainties and evolving buyer preferences. In this environment, realistic pricing is not merely a tactic for selling; it becomes a critical tool for differentiation in a competitive marketplace. Southampton properties priced in line with current market realities are more likely to attract serious buyers and foster successful home moves.

My final thoughts are that homeowners need to understand and master the art of property pricing, which is crucial in today's challenging and complex real estate market, especially in a diverse and evolving area like Southampton.

As an estate agent committed to delivering the best outcomes for my clients, my role goes beyond facilitating property transactions; it involves guiding and educating Southampton homeowners to make informed decisions in this dynamic market. Regardless of which estate agent you choose, remember that realistic and accurate pricing is the cornerstone of success in the current property landscape.

If you're thinking of moving in the next few months, and you want to know the true place of your Southampton property in the Southampton property market as a whole, or you are presently on the market with another Southampton agent and you would like an honest opinion of where you stand, please do not hesitate to contact me.

How the 19% Saleability Drop in the Southampton Property Market Might Impact Your 2024 Home Moving Plans

 

The Southampton housing market, like many others, has experienced a notable shift in 2023.

The percentage of home sales agreed and moved (completed) compared to those withdrawn from the market unsold has decreased relative to 2022.

Looking at independent data for the Southampton area (SO14 to SO19) …

 

In 2022, 70.6% of properties that left the books of Southampton estate agents agreed a sale, exchanged contracts, and the owners moved home

 

(3,801 Southampton area properties exchanged and completed vs 1,578 properties that withdrew from the agent’s books, unsold).

 

In 2023, 57.2% of properties that have left the books of Southampton estate agents agreed a sale, exchanged contracts, and the owners moved home

 

(3,015 Southampton area properties exchanged and completed vs 2,252 properties that withdrew from the agent’s books, unsold up to the 20^th December 2023), meaning there has been a …

 

19% proportional reduction in the saleability of

Southampton homes between 2022 and 2023

 

It's interesting to compare that with the South East regional and national stats for both years.

In the South East, 63.46% of properties were exchanged, completed, and moved in 2022, compared to 47.54% in 2023, a drop of 25.1%. Nationally, 65.55% of properties were exchanged, completed and moved in 2022 compared to 52.39% in 2023, a decline of 20.1%.

This could raise concerns among Southampton homeowners and potential sellers. As a seasoned estate agent in Southampton, I have observed these trends closely and offer insights into this phenomenon and strategies to enhance your home's saleability in 2024.

 

Understanding the Dip in Saleability in Southampton

Economic Influences: much like the rest of the UK, Southampton has been subject to financial pressures such as inflation and Bank of England interest rate increases. These factors have affected buyer affordability, leading to a more cautious approach to home purchasing.

Market Saturation and Buyer's Market: 2023 saw a surge in Southampton properties on the market. This increase changed the Southampton property market from a strong seller's market to a balanced market or even a buyer's market in some parts of Southampton throughout 2023, where the availability of choices led to a more selective purchasing behaviour.

Changing Buyer Preferences: In Southampton, buyer preferences have evolved. There's a growing demand for properties that offer flexible living spaces, energy efficiency, and modern amenities, which not all available homes meet.

Local Economic and Social Factors: Southampton's local economic and social developments, such as job market shifts and community developments, have also played a role in influencing the housing market dynamics.

 

Six Tips to Maximising Your Southampton Home's Saleability in 2024

 

Southampton properties are still selling, yet not at the rate they were in 2021 and 2022.

Just over 11 out of 20 Southampton people in 2023 have sold and moved (i.e., the 57.2% figure mentioned above). If you want to avoid being in the 9 out of 20 Southampton people who were unable to sell and move this year, there are some things that you can do to stack the cards in your favour.

To start with, the saleability levels in Southampton in 2023 are very similar to the saleability rates between 2014 and 2019.

1.     Strategic Pricing: Understanding the Southampton market is critical. Homes priced correctly from the outset are more likely to attract serious buyers. This requires a deep understanding of the local market trends, something a knowledgeable estate agent can provide.

2.     Tailoring to Buyer Preferences: Align your Southampton home with current trends. This could mean investing in creating flexible work-from-home spaces, upgrading energy systems, or modernising key areas like kitchens and bathrooms. However, before you start spending tens of thousands of pounds on this, please do pick up the phone so I can give you the best advice for the type of property you own in Southampton. I have lost count of the number of times I've seen a Southampton homeowner spend money on the wrong things without advice, only to find the money they spent did nothing for the value of their home nor made it more saleable.

3.     Effective Marketing: Utilise a comprehensive marketing strategy that includes high-quality photography, virtual tours, and leveraging online social media and portals. As experts in the Southampton property market, we can target the correct demographic and present your home in its best light.

4.     Preparing for Viewings: First impressions matter. Ensure your Southampton home is well-presented, clean, and decluttered. We can offer personalised advice on the presentation of your home to appeal to potential buyers.

5.     Flexibility and Negotiation: Be prepared for negotiation and show flexibility in terms of viewing times and conditions of sale. This approach can make your property more appealing compared to others on the market.

6.     Capitalising on Local Knowledge: Southampton's unique charm and amenities should be highlighted. As a local market expert in the city, I can help showcase these aspects effectively to potential buyers.

The decrease in the saleability rate in Southampton reflects broader economic trends and evolving buyer preferences. However, with the right approach and strategies, selling your home in 2024 can be a realistic and successful endeavour.

By understanding the Southampton market, pricing strategically, aligning with buyer preferences, and utilising effective marketing and presentation techniques, you can significantly enhance your chances of a successful sale.

As a Southampton property market expert, I offer more than just transactional advice; I provide insights into what makes our local Southampton market tick. By partnering with a knowledgeable estate agent, you can confidently navigate these challenging times and maximise your chances of a successful home sale in 2024.