Southampton Property Owners Reap £7,224 Yearly Gains Since 2001

  As we are now nicely into 2024, it’s certain the Southampton housing market over the last 18 months has been a little more restrained than 2020, 2021 and early 2022, and I believe that the ‘steady as she goes’ outlook will continue into the rest of 2024 and beyond.

As property ownership is a medium to long-term investment, it is important to see what has happened to Southampton house prices.

Since the start of the Millennium (Jan 2001), the average Southampton homeowner has seen their property’s value rise by an average of 173%.

This is important as house prices are a national obsession and tied into the health of the UK economy as a whole. Most of that gain has come from the overall growth in Southampton property values, while some of it will have been enhanced by extending, modernising or developing their Southampton home.

Taking a look at the different types of property in Southampton and the profit made by each type, it makes interesting reading:

• Overall Average For All Homes in Southampton. The average price of all homes in Southampton in 2001 was £98,084. Now it’s 2024, it has risen to £264,233. This is a total profit of £166,149 (which is £7,224 profit per year per home or an annual growth of 7.5% per year).
• Apartments in Southampton. The average price of an apartment in Southampton in 2001 was £73,007. Now it’s 2024, it has risen to £146,608. This is a total profit of £73,601 (which is £3,200 profit per year per home or an annual growth of 4.4% per year).
• Terraced/Town Houses in Southampton. The average price of a terraced/town house in Southampton in 2001 was £85,197. Now it’s 2024, it has risen to £258,663. This is a total profit of £173,466 (which is £7,542 profit per year per home or an annual growth of 8.9% per year).
• Semi-Detached Homes in Southampton. The average price of a semi-detached home in Southampton in 2001 was £103,331. Now it’s 2024, it has risen to £304,635. This is a total profit of £201,304 (which is £8,752 profit per year per home or an annual growth of 8.5% per year).
• Detached Homes in Southampton. The average price of a detached home in Southampton in 2001 was £180,444. Now it’s 2024, it has risen to £488,879. This is a total profit of £308,435 (which is £13,410 profit per year per home or an annual growth of 7.4% per year).

However, we can’t forget there has been 79% inflation over those 23 years, which eats into the ‘real’ value (or true spending power of that profit) … so if we take into account inflation since 2001, the true ‘spending power’ of that profit has been lower.

• Overall Average For All Homes in Southampton. The total ‘real profit’ (i.e., after inflation has been removed) for the average Southampton home is £92,459 for the last 23 years. This equates to £4,020 ‘real’ profit per annum.
• Southampton Apartments. The total ‘real profit’ (i.e., after inflation has been removed) for the average Southampton apartment is £40,958 for the last 23 years. This equates to £1,780 ‘real’ profit per annum.
• Southampton Terraced/Town Houses. The total ‘real profit’ (i.e., after inflation has been removed) for the average Southampton terraced/town house is £96,531 for the last 23 years. This equates to £4,197 ‘real’ profit per annum.
• Southampton Semi-Detached Homes. The total ‘real profit’ (i.e., after inflation has been removed) for the average Southampton semi-detached home is £112,022 for the last 23 years. This equates to £4,870 ‘real’ profit per annum.
• Southampton Detached Homes. The total ‘real profit’ (i.e., after inflation has been removed) for the average Southampton detached home is £171,639 for the last 23 years. This equates to £7,462 ‘real’ profit per annum.

Thus, the annual profit for an average Southampton home, adjusted for inflation, stands at £4,020.

I wanted to illustrate that despite the 2008/09 Credit Crunch property market crash, which saw Southampton property values plummet by 15% to 20% over 18 months, homeowners in Southampton have still fared better over the long term than those renting.

Looking ahead, a common question I get asked is about the future trajectory of the Southampton property market.

The primary influence on maintaining house price growth in Southampton over the medium to long term will be the construction of new homes locally and nationally. Although we have yet to get the figures for 2023, government sources indicate that the number of new households is expected to be between 210,000 and 220,000. Considering the annual need is for 300,000 new households to meet demands arising from factors such as immigration, increased life expectancy, higher divorce rates, and later cohabitation, it’s clear that demand will continue to outstrip supply unless the government heavily invests in building council houses.

This can only be good news for Southampton homeowners.

What about Southampton landlords, though?

Even though the number of landlords liquidating their property portfolios has increased in the last couple of years and the number of landlords buying is lower than in the 2000s and 2010s, there is still net growth in the size of the private rented sector each year. This is all despite facing higher taxes. The simple fact is many Southampton landlords remain keen on expanding their portfolios in the long term.

The younger generation in Southampton views renting as a choice that offers flexibility and alternatives that homeownership does not provide. This means that demand for rentals will keep growing, allowing landlords to enjoy rising rents and capital appreciation. However, Southampton buy-to-let landlords must adopt more thoughtful strategies to maintain profitable returns from their investments.

As a Southampton buy-to-let landlord, the question for you is how to ensure this growth continues.

Since the 1990s, generating profits from buy-to-let property investments was straightforward. Moving forward, with changes in the tax laws and the balance of power, achieving similar returns will be more effortful. Over the past decade, I’ve observed the evolution of agents from mere rent collectors to strategic portfolio managers. I, along with a select few agents in Southampton, am adept at providing comprehensive, strategic portfolio leadership. This service offers a structured overview of your investment goals across short, medium and long-term horizons, focusing on your expected returns, yields and capital growth. If you seek such advice, feel free to contact your current agent or me directly at no cost or obligation.

Southampton's Restless Homeowners: The 5 Year 39 Week Itch In The Southampton Housing Market

There are 28.4m households in Britain, of which 17,693,200 are owned, worth a total of £5,127,807,837,600 (£5.1 trillion). When you add all the private rented homes and council houses, that figure reaches just over £8.5 trillion!

Over the last six years, 76,669 UK properties have sold each month, meaning the average British homeowner moves every 16 years and 7 months.

This data disproves a standard theory that British neighbourhoods are becoming more fleeting and transitory. On the face of it, they show that once you have bought a property you can call home, there isn’t much motivation to move again.

So, are fewer people moving home?

Could it be attributed to a sense of contentment or indifference to moving home?

While we might love our home in Southampton, most of you (including myself) still want to ‘better ourselves’ with a bigger house, better area, etc, which typically requires us to climb the Southampton property ladder.

Yet, with Southampton house prices having risen by 356% since 1995, the cost of going up the next rung on the Southampton property ladder is prohibitive.

Everyone remembers the 1980s when we had a buoyant booming property market as a backcloth; British homeowners moved home every eight or nine years; so now, with the average at just over 16 years, this means each British homeowner moving around two or three times in their adult homeownership lifetime. Maybe we should all rename our homes ‘Dun-Roamin’! Or does it? 

We have all heard the phrase, “lies, damn lies and statistics”.

The statistics mentioned above conceal some astounding features of the British property market. When British homeowners enter their late 50s and early 60s, their inclination to move home drops tremendously. The average length of time a homeowner without a mortgage moves home is 23 years and 3 months (and around seven out of ten outright homeowners, i.e. without a mortgage, are 65 years old or older). 

Yet, British homeowners (with a mortgage) move on average every 9 years and 11 weeks.

So, whilst I cannot determine who has a mortgage and who doesn’t, I can look at how quickly people move home in Southampton. I have looked at the last 40 property sales in Southampton and found some interesting findings.

The average Southampton homeowner moves onaverage every 12 years and 41 weeks.

Remember, the UK average is every 16 years and 7 months. Yet it gets fascinating when we delve deeper into that stat.

There seems to be a two-speed (even three-speed) Southampton property market (remember in the title I said 5 years and 39 weeks).

To start, having looked at the last 40 Southampton property sales I then put them in order of how long they had been in that home before they moved, with the fastest first and slowest at the end.

When we look at the 25% quickest home movers in Southampton (i.e. 1st to 10th) and then the next slice (the 11th to 20th quickest movers) … these Southampton home movers are moving home really fast, yet the gap for the successive two slices broadens remarkably, (i.e. the slowest movers). See for yourself!

• The quickest 25% of Southampton home movers (i.e. 1st to 10th) moves every 3 years & 41 weeks – that’s a quick move!
• The next fastest quartile (i.e. 11th to 20th) of Southampton home movers moves every 7 years & 36 weeks.
• The following 25% quickest quartile (i.e. 21st to 30th) of Southampton home movers moves every 15 years & 20 weeks.
• Finally, the 25% slowest quartile (i.e. 31st to 40th) of Southampton home movers only moves every 24 years & 15 weeks.

Looking at the top 50% of the quickest movers, half of Southampton homeowners move home again within 5 years and 39 weeks.

When looking at the properties that fall into the later bands (i.e. the ones that don’t move/sell so often), they tend to be the larger properties where the homeowners have lived for 30 years plus.

We all should learn that once people get into their 50s and 60s, their tendency to move home drops significantly. This means the properties on the lower rungs of the Southampton property ladder sell more often (as younger homeowners occupy them). Yet, once Southampton homeowners get older, their inclination to move home diminishes. This obstructs the younger Southampton generation wanting to buy the bigger Southampton homes these mature homeowners live in.

What is stopping the older generation homeowners from selling and downsizing to free up family homes for families that desperately need them? Some of it will be apathy, some will hold on to the homes they brought their families up in, or there might be another reason.

However, when you consider …

50.2% of owned homes in Britain havetwo or more spare bedrooms.

That’s a lot of spare bedrooms, at least 15,553,574 spare bedrooms, not being used in the UK.

As a country, we need to change how we can support older homeowners in selling their large, underutilised homes to allow them to house the younger families that badly need them. Some people suggest tax breaks, yet the Government aren’t in the mood to give massive tax breaks to people who would ‘tend’ to be their existing voter base. Much of it comes down to not finding the right home to move to.

As a nation, we have seen (and will continue to see) a lot of socio-economic and demographic changes together with a rising elderly population, so it’s not just about how many homes we build but whether we are building the right kind of homes the older generation want to move into.

Interesting times ahead for the Southampton property market!

If you are a mature Southampton homeowner in a large home and are afraid to move because you can’t find one, please don’t hesitate to contact me on 023 8001 8222. I might be able to place your Southampton home on the market without a for sale board or internet listing and find you a buyer who is prepared to wait for you to find one. If this interests you, without obligation do not hesitate to pick up the phone.