Southampton Tenants Face Further Rent Hikes, as the Number of Available Rental Homes Drops by 36%

 

• The number of properties available to rent in Southampton has dropped from 3,519 to 2,267 since February 2020.

• The average rent a tenant has had to pay in Southampton has risen from £932 to £1,716 since February 2020.
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•     Many Southampton landlords have cashed in on the post-lockdown property boom of the last two years and sold their properties to owner-occupiers - not fellow landlords.

• The supply of Southampton rental property isn't near what is needed, which is of benefit to Southampton landlords rather than Southampton renters. 

 

The Southampton rental property shortage is currently very evident. In this article, I will investigate why there is such a significant lack of homes available for rent across Southampton and what it means for buy-to-let investors.

Anybody who enjoys surfing the property portals (Rightmove, Zoopla and On the Market) will have observed an emerging trend that the number of properties available to rent in Southampton has dropped considerably in the last couple of years.

This reduction has been seen all around the UK as well. For example, on 1^st November 2020, there were 372,931 properties to rent on portals. By the 1^st November 2021, that had dropped to 275,650; by the 1^st November 2022, that had fallen to 171,224.

That doesn't mean the number of privately rented homes in the country has dropped by over half. Fewer properties are coming onto the market to rent. I will explain why in this article.

 

For tenants, especially over the last 12 months, it has become progressively more challenging to find a Southampton rental home, thus making the rent they must pay go up. This state of affairs in the property market isn’t showing an indication of getting any easier either, making for a hard time for Southampton renters.

So, what is the reason behind the Southampton rental property shortage, and what does this mean for existing Southampton landlords or those potential investors considering buying a Southampton buy-to-let property soon?

 

Several different components are making the perfect storm in the UK property market.

Firstly, the number of households in the UK.

The UK has not been building enough homes for the last 20 years. I appreciate that parts of Southampton seem like one huge building site, yet as a country, we are woefully undersupplied with property to live in. This has meant house prices continue to rise due to demand. 

The government have known about this issue for decades. The Barker Review of Housing Supply published in 2004 stated that the UK had experienced a long-term upward trend of 2.4% in real house prices since the mid-1970s because of a lack of house building. The report stated that 240,000 houses needed to be built each year to keep up with demand.

 

The average number of houses built since the mid-1970s has been around 165,000 per year, meaning the UK is short of 3,375,000 houses

(i.e., 45 years multiplied by 75,000 missing homes per year).

 

Several years ago, the government set a target to build 300,000 new homes each year to address this issue.

However, in 2019/20, the actual number of homes delivered stood at just 243,770. In 2020/21, the number of properties built dropped to only 216,000 new homes. In a nutshell, there are fewer available homes to buy, meaning fewer available homes to rent. 

Secondly, Southampton tenants are staying in their rental homes longer.

A Southampton first-time buyer's average house deposit is £60,953

(the UK average deposit is £53,935).

The average rent of a Southampton property in November 2022 is £1,716 per calendar month (up from £932 per calendar month in February 2020) – quite a rise!

These numbers translate into Southampton renters not being able to pay the rent and be able to save for a deposit, or if they are saving, it is taking a lot longer to save for a deposit due to the cost-of-living crisis and higher rent costs.

Also, many Southampton tenants have decided to stay in their existing rental homes because of the rent rises. Many landlords are less inclined to raise the rent on an existing property when they have a decent tenant who keeps the property in good condition and pays rent on time. Anecdotal evidence also suggests that rent arrears in those properties are dropping as tenants know if they don’t pay the rent, the chances are they will have trouble finding another property, and if they do, they will have to pay a lot for their next rental home.

For Southampton landlords, this is all positive news - tenants are staying for longer in their Southampton rental properties, arrears are lower, and void periods are less likely. When it comes to the market, there is less competition (because of the decrease in the availability of Southampton rental properties) so this makes the investment an even better bet.

Thirdly, landlords are selling up on the back of recently increased house prices.

It would be difficult for Southampton buy-to-let landlords to ignore the rising property prices in recent years.

The average property value in Southampton in the summer of 2022 was 11.0% higher than in the summer of 2021.

 

For some Southampton buy-to-let landlords, especially those who were classified as ‘accidental landlords’ (an accidental landlord is a landlord who never chose to become a landlord, it was just after the Credit Crunch of 2008/9, they found themselves unable to sell their property, so they temporarily let their own property out), they chose to ‘cash in’ on the higher house prices. This would have also contributed to the lack of available Southampton homes for rent.

 

Yet everything isn’t all sweetness and light for Southampton landlords.

Landlords have a few costs to consider before investing in buy-to-let, including everything from regular refurbishment costs, buildings insurance, letting agents’ fees, income tax, and, not forgetting, stamp duty.

Talking of costs, one issue some Southampton landlords are facing is their failure to plan financially for the recent mortgage interest rate rises. Some Southampton landlords may have become complacent to the ultra-low Bank of England base rates we have had since 2008 and, therefore, may need to sell their rental property, which, if bought by a first-time buyer, will remove another property from the Private Rented Sector.

Another hurdle to jump is the proposed new regulations requiring better energy efficiency for rental properties. It is proposed all new tenancies must have at least a minimum of a 'C’ rating for their EPC (Energy Performance Certificate) from 2025 (and 2028 for all existing tenancies).

Therefore, as a buy-to-let Southampton landlord, it is wise to do your research to make sure the buy-to-let opportunity is correct for your rental portfolio, particularly when it comes to weathering any impending financial storms. 

Landlords need to consider the returns from their

Southampton buy-to-let investments.

Landlords can earn money from their buy-to-let investments in two ways. One is the property's capital growth, and the other is the rental return (often expressed as a yield). In 96% of buy-to-let investments, there is an inverse relationship between capital growth and yield (i.e., properties that tend to go up in value quicker will have lower yields 96% of the time – and vice versa).

Getting the best balance of yield and capital growth depends on your current and future needs from your Southampton buy-to-let investment.

If you would like me to review your portfolio and ascertain if your existing portfolio will match your current and future needs for the investment - whether you are a client or not, feel free to drop me a line, and we can have a no-obligation chat and possibly organise a review.

 

What does all this mean for the Southampton rental market?

 

The continued shortage of Southampton rental properties means it will be more difficult than ever to find a Southampton property to rent, and so rents will continue to grow.

Unlike in Scotland, England and Wales do not have rent controls, with Westminster ruling out the possibility of introducing rent control here to deal with the cost-of-living crisis.

You would think rent controls would be a no-brainer, yet economists from around the world have proved for the last 75 years that rent controls might help tenants in the short term, yet ultimately it drives landlords to sell their investments in the long term, thus reducing the stock of available properties to rent out (not great for future tenants).

Therefore, it is highly likely that Southampton rents

will continue to rise for tenants.

Landlords who persevere with their Southampton buy-to-let properties or become a Southampton buy-to-let landlord are set to benefit because they have an asset in very high demand.

The housing shortage, not to mention the other issues discussed above that are affecting the supply of rental properties, is unlikely to be fixed anytime soon!

In conclusion, the Southampton rental market is a constantly changing picture. What is known is that the supply of rental properties is far from what is needed, which can only be to the benefit of buy-to-let investors rather than of tenants renting.

I see buy-to-let as a long-term investment. Everyone reading this knows that the real value in your buy-to-let investment is playing the long game, allowing your Southampton buy-to-let investment to grow over time. Like the crypto or stock market, getting sucked in by get-rich-quick schemes that are selling 'apparent quick wins' in property investment is very easy.

I regularly highlight the best buy-to-let deals for Southampton landlords with all the estate agents (not just my own). You don't need to be a client of mine either to receive that information. Drop me a line or call (without any cost or obligation) if you are interested in making your first Southampton buy-to-let investment or considering adding to your existing Southampton portfolio.

New year, new move

The new year encourages many of us to make positive changes in our lives. A popular choice is pledging to do more exercise, while some people might decide to learn a new skill. But if you were one of the many sellers who put their home on the market last year and you haven’t yet found a buyer, this new year you’re probably resolving to get that sale!

As estate agents, we find that pretty much every new year brings with it not only a flood of requests from homeowners for valuations, but also a steady stream of enquiries about homes for sale. That means as we make our way through winter towards the spring, the market is usually buzzing.

So, how can you best take advantage of this activity and make sure your home attracts and secures the perfect buyer?

Here’s our round up of five positive steps you can take right now to revamp your marketing strategy and ensure this is the year you move on and make a fresh start in a new home.

 

1. Take a brief rest from the market

In our experience, a home tends to generate the greatest interest from buyers in the first two to three weeks that it’s on the market. When your home appears as a new listing, buyers who are registered with online portals should receive a link to the details, and your agent should be sending out the brochure to their own database of potential buyers.

But after that initial flurry of activity, things often settle down on the viewing front, and we find that the longer your home is on the market, the less likely it is to attract the perfect buyer. As those who have been looking for a new home for a while keep seeing your listing, the fact that it hasn’t sold yet may make it less desirable to them, and you’re more reliant on new buyers who are just starting their search.

So, if you’ve been advertising for several months, it could be a good idea to take a break just for a few weeks, in order to reignite interest. Give the market time to move on a little bit – let some sales of other homes that are comparable to yours go through and wait for new buyers to enter the mix – then you can relaunch your home with some fresh marketing.

And while you’re temporarily off the market, you can use the time to review your sales and marketing plan with your agent and take some positive actions, beginning with a review of what buyers who have already seen your home have said about it.

 

2. Review feedback from viewings

Feedback from potential buyers who have viewed your home can often be incredibly useful. Finding out what they liked and what didn’t appeal so much helps both you and your agent understand what could be discouraging people from making an offer.

For instance, if viewers thought some rooms felt a little dark or smaller than they’d hoped, could you change the lighting or perhaps rearrange some of the furniture to maximise light and space? Or, if the feedback was that certain rooms felt dated or needed some work, would you be prepared to spend a little money on upgrades or redecoration, to help achieve the best possible price for your home?

So, discuss with your agent the feedback people have given so far, and if several buyers have highlighted the same points, look at whether there’s anything you can do to change those things and make your home more attractive to buyers. And feel free to contact us for some advice – we’re always here to help!

 

3. Style your home for the spring

Some simple restyling can be a great, cost-effective way to give your home a new look for the new year, and you might be surprised what you can achieve with just a few accessory changes.

Pack away any dark-coloured or heavy cushions, throws and rugs – all the touches that helped make your home feel extra cosy through the winter – and replace them with lighter fabrics. Invest in some crisp white bed linen (which will also brighten up the bedrooms in your new home when you move!), and make sure curtains and blinds are well drawn back to let as much daylight in as possible. Breathe new life into each room with freshly cut flowers and leafy plants, and swap large pillar candles and storm lanterns for just a few more subtle, light floral-scented candles. You can also check out the latest issues of home magazines for more current style tips.

Finally, think about how the furniture is positioned – could a different configuration make a room feel more spacious and inviting to potential buyers? And don’t forget, you can always ask for some help with this. We know ourselves that it can be tricky to look at your own home objectively, so maybe ask a friend to cast their eye over it and give you an unbiased opinion.

 

4. Ask your agent to take new, professional photographs

Professional photographs can make all the difference to the success of your home’s marketing. Great eye-catching photographs don’t only show what’s in a home, they tell a story and illustrate a lifestyle that really grabs the imagination of potential buyers, making them want to live that life themselves.

For example, a professional sitting room photograph might feature a roaring fire and some glossy magazines next to an afternoon tea on the table, conveying a sophisticated, yet warm and relaxing feel. And a bathroom shot might show a steaming bubble bath, surrounded by candles and soft lighting, to give the feeling of a luxurious spa.

A photographer who’s experienced in shooting homes for magazines and sales brochures will know exactly how to capture each room looking its absolute best – from the angle and lighting to incorporating the finest lifestyle features into the shots.

So, once you’ve revamped the styling of your home, ask your agent to have some new, professional photographs taken. Not only will that ensure your images look current and in line with the season, but if you’ve taken a break from marketing, it means you can relaunch with an entirely new portfolio of stunning shots and potentially attract buyers that might not have noticed your home before.

 

5. Update your brochure

Take another look at the brochure your agent’s been sending out to prospective buyers. Are you happy with the quality, and do you feel it properly reflects the value of your home? It should showcase a desirable lifestyle that will grab buyers’ attention and entice them to view – does it do that?

Once you’ve had new photographs taken, your brochure will need updating anyway, so this is your opportunity to make any other changes that could help attract that perfect buyer. So make sure:

• The front cover features a striking photograph of the exterior – we find a twilight shot with all the interior lights on often makes a stunning first impression
• The order of the interior photos takes buyers on a logical journey through the home, as they might see it on a viewing
• The written copy has an enthusiastic tone and is full of descriptive and emotive adjectives to capture the buyer’s imagination
• There is a floorplan that includes room dimensions and the overall floor area and shows the orientation of your home.

 

Of course, depending on how your agent responds to your suggestions and how happy you are about your experience with them to date, you may feel it’s time for a complete change of approach with a new agent. In that case, take a look at our blog ‘Thinking of changing estate agents? – Our smooth move guide’ https://bit.ly/3JyR3Zs

And if you’re ready to step things up a gear so you can get moving this new year, we’d love to hear from you. Get in touch and we’ll be delighted to take you through our bespoke marketing approach and discuss how we can help you achieve a successful sale at the best possible price. Just call on 02380018222 or email brian.linehan@belvoir.co.uk and we’ll get right back to you.