Will the Southampton Property Market Continue to Boom?

 

All the signs are that the Southampton housing market is sat on good foundations, yet one key hazard could still scupper the market.

 

‘UK Property Prices Rising at Record Levels’ is the headline of many newspapers. In the last few weeks, the Halifax reported they had grown by 6.5% in the last 12 months, whilst the Nationwide said 7.1% and not to be outdone, the Government’s own Land Registry said 8.6%. Nothing new there then you might think, don’t UK house prices always increase?

 

Actually, they don’t, as many Southampton homeowners will remember 2009, when they dropped by 19%. Also, some more mature Southampton homeowners will remember the early 1990’s where house prices dropped just over 40% over 4 years (after the 1989 property crash). So, the increase in UK house prices over the last 12 months has mystified all the forecasts made by most economists as…

 

house prices were forecast to drop during the pandemic because during the previous six UK recessions experienced since WW2, house prices have always fallen sharply in real terms.

 

Yet 2020 was different with house price growth increasing at its highest rate since 2014 as the substantial Government support programmes (including Bounce Back Loans, grants and furlough) has mollified the hit to household incomes. Add to that the pent-up demand from the Boris Bounce, all the people working from home wanting an extra room for an office and therefore needing to move, plus the stamp duty tax holiday, with the cherry on the cake of 0.1% Bank of England interest rates keeping borrowing affordable. This has meant…

 

Southampton property values are 7.8% higher than a year ago.

 

Yet the affordability of property is a big issue going forward. By the time of the height of the last property boom in 2008, the national ratio of average property values to earnings had risen from 5.1 in 2000 to 8.8 (i.e. the average house price was 8.8 times the size of the UK’s average person’s annual earnings). We then had the property crash in the proceeding years, and the ratio dropped to around late six’s/early sevens. However, over the last few years, the ratio has been steadily rising and now with the recent growth in demand for property (the five reasons mentioned in the previous paragraph), the ratio has now smashed past nine. Looking locally…

 

the ratio of average property values to earnings in Southampton as a comparison was 3.9 in 2000, rising to 6.0 in 2008, dropping to 5.3 the year later when the Credit Crunch hit, and now currently stands at 6.8.

So, are we heading for another house price crash? Maybe, maybe not - because the House Price to Earnings ratio only tells us part of the story. Another indicator of the property market is mortgage affordability, which measures the proportion of mortgage payments to average incomes. For all mortgage holders, in 2015, this stood at 24.13% and today it is only just above the national long-term average of 25%, demonstrating that property is still affordable.

 

Yet, the life blood of the property market are first-time buyers. The long-term average percentage of income which goes on mortgage payments for first-time buyers is 33%. Just before the 1989 property market crash, this stood at 54%. Whilst just before the 2008 property crash, it reached 49%. Today, it stands at 31.7% (and the reason it’s so low even with record high property prices is low interest rates, because when mortgage interest rates are low, this permits people to afford larger mortgages, which enables them to bid up house prices).

 

So why aren’t more first-time buyers buying more homes? Well in fact they are buying more homes. At the turn of the Millennium, just over half of 25yo to 35yo were homeowners and by 2014, this had dropped to just a third, although since then it has increased to 41%. Now with the reintroduction of the Government backed 95% mortgages in April, this demand will continue further.

 

Once furlough ends, unemployment will doubtless rise in the following 12 months, yet the economy is more than likely to be in a boom phase, so by the spring/summer of 2021, the unemployment rate should start to fall.

 

So, does everything look great for the Southampton property market?

 

Before you get the Champagne out, there is a cloud on the horizon - the possibility of higher interest rates.

 

Undoubtedly, for the next few years, interest rates will not go up (and if they do – it will only be nominally). However, down the line it may be a different tale. Interest rates are used to control a number of economic factors, one being the currency and secondly inflation.

 

As many suggest, if we get an economic boom in the next 12 to 18 months, as we come out of lockdown, this will put upward pressure on the price of goods and services. Normally, when prices go up (inflation), to ensure that inflation doesn’t get out of control, interest rates are normally increased to dampen down the inflation.

 

So, will interest rates rise? Undoubtably they will. Southampton homeowners and buy-to-let landlords should seriously consider protecting themselves with fixed rate mortgages (yet 3 in 10 mortgagees are still on variable rate mortgages!). I believe we will see some inflation in the order of 3% to 5% in the coming 24 to 36 months, yet the interest rates won’t be enabled to bring it down. We had a similar case in the early 2010’s when we had a mis-match of demand and supply of goods, and inflation spiked to 5%, before returning back to its long term 2% average quite quickly thereafter.

 

The Chancellor will also encourage some inflation to reduce the ‘real’ cost of the Billions he has borrowed because of the pandemic, yet won’t want to see interest rates increase to take the cost of the borrowing upwards.

 

If you are considering moving home or buying/selling a buy-to-let property in Southampton in the next 12 to 18 months, and want a chat about your options, don’t hesitate to drop me a line.

 

Finally, these are interesting times ahead – I would love your thoughts on this matter. Please do share them in the comments.

CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

 

If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.

 

If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.

 

 

Don't forget to visit the links below to view back dated deals and Southampton Property News.

 

Blog, http://southamptonproperty.blogspot.co.uk/

 

Facebook, https://www.facebook.com/belvoirsouthampton/

 

Twitter, https://twitter.com/sotonbelvoir

 

LinkedIn, https://www.linkedin.com/in/brianlinehan

 

Website, https://www.belvoir.co.uk/offices/southampton

𝐄𝐢𝐠𝐡𝐭 𝐖𝐚𝐲𝐬 𝐒𝐨𝐮𝐭𝐡𝐚𝐦𝐩𝐭𝐨𝐧 𝐋𝐚𝐧𝐝𝐥𝐨𝐫𝐝𝐬 𝐂𝐚𝐧 𝐆𝐞𝐭 𝐭𝐡𝐞 𝐁𝐞𝐬𝐭 𝐈𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐃𝐞𝐚𝐥

In this three-minute read, we look at how landlords can avoid getting a bad insurance deal

If you’re a landlord looking to take out insurance or renew a current policy, there are a few things you should know.

The insurance market is “hardening”, or in other words, insurers are tightening their belts.

The rising costs of claims due to extreme weather events such as last year’s Storm Dennis and low interest rates (meaning insurance firms make less on their investments) have hit the industry hard.

As a result, insurers are upping the cost of premiums and employing other – less obvious – tactics to increase their bottom line.

𝐁𝐮𝐭 𝐟𝐢𝐫𝐬𝐭, 𝐚 𝐪𝐮𝐢𝐜𝐤 𝐫𝐞𝐦𝐢𝐧𝐝𝐞𝐫

Landlords need specific insurance; a standard home and contents policy will not suffice. Landlord insurance is usually a condition of a buy-to-let mortgage, but even if you’re debt-free, it’s worth getting. (You hope the worst won’t happen, but if it does, you’ll be covered.)

Standard policies include buildings and liability cover, although you can also opt to include things like legal costs, accidental damage, or loss of rent.

𝐈𝐧𝐬𝐮𝐫𝐚𝐧𝐜𝐞 𝐭𝐢𝐩𝐬 𝐟𝐨𝐫 𝐒𝐨𝐮𝐭𝐡𝐚𝐦𝐩𝐭𝐨𝐧 𝐥𝐚𝐧𝐝𝐥𝐨𝐫𝐝𝐬 𝐅𝐨𝐥𝐥𝐨𝐰 𝐭𝐡𝐢𝐬 𝐜𝐡𝐞𝐜𝐤𝐥𝐢𝐬𝐭 𝐭𝐨 𝐠𝐞𝐭 𝐭𝐡𝐞 𝐛𝐞𝐬𝐭 𝐝𝐞𝐚𝐥:

- If you already have a policy, read it thoroughly before you start your research. It might not be the most exciting few hours of your life, but your diligence could save you time and money in the long run.

- Note in your diary when your policy is due to expire and leave yourself enough time to shop around. You won’t get the best deal if you’re in a last-minute panic.

- Look at what the premium covers. Is there a gaping omission that could leave you exposed? If it’s an existing policy, has your coverage been reduced?

- Check the standard excess (excess rates have been creeping up). The policy premium might be appealingly low, but if the excess is high, you could wind up paying more in the long run.

- Be aware that some types of claims have a higher excess. For example, escape of water (which covers leaks and burst pipes) has a higher excess as it’s a more common occurrence.

- Check the rules around vacancy as some policies become void if the property is empty. As there could be a rise in tenant turnover when furlough ends later this year, ensure your policy gives you a bit of leeway on vacancy periods.

- Have your paperwork to hand when talking to insurers. They’ll want to know (and see proof of) the age of the property, state of repair, and claims history.

- Some policies only cover certain types of tenants – for example, professionals – who are viewed as low risk. It may pay to include other tenant groups, such as students, in your policy to give you more flexibility.

For more advice about protecting your rental property, get in touch with us here at Belvoir.

COPYRIGHT Belvoir Southampton 2021

Will Southampton House Prices Fall in 2022?

One of the most astounding things that has happened in the last 12 months was something that did not happen. Even after the country saw the deepest recession since the Great Freeze of 1709 with GDP dropping 28% in one quarter, one would have expected a large fall in Southampton house prices would follow. Yet…

 

Southampton house prices are 7.8% higher than 12 months ago.

 

Even though buying and selling Southampton property was put on ice for the first time in the history of the Southampton property market last spring due to the Covid 19 outbreak, as the Southampton property market wobbled on the edge of a deep recession, it stepped back in early summer and now it is rocketing upwards as…

 

13.4% of Southampton homes are selling within a fortnight of coming to market.

 

Some commentators have suggested the end of the Stamp Duty holiday together with the ending of the furlough scheme on the 30^th September 2021 could be the catalyst for a drop in house prices. Even the Government’s own regulator of finances expects UK house prices to fall around a couple of percentage points in 2022 whilst some others have predicted a drop of around 5% as unemployment levels increase post furlough.

 

However, other property market forecasters believe that property values in 2022 won’t drop against the background of robust British economic recovery in Q3 and Q4 of 2021.

 

What do I think will happen to the Southampton property market in the next 12 months?

 

On the positive side, what I do know is the Stamp Duty holiday enabled Southampton homebuyers to spend those tax savings on the price paid for their Southampton home and that certainly accounts for some of the uplift in house prices mentioned above.

 

Also, the historically low interest rates that have supported Southampton homebuyers’ affordability for the last 13 years since the Credit Crunch has continued. Secondly, with people spending many months working from home, this has seemed to have polarised people’s inclination to make lifestyle changes. Finally, the Government has recently introduced 5% deposit mortgages for first-time buyers. All these factors will fuel demand and hence may cause house prices to rise.

 

On a more cautious note, I do not believe these very sturdy Southampton house value rises of the past year will persist at these levels for the next 12 months. With buyers having to use many thousands of pounds on Stamp Duty, the price they pay for their Southampton home will be curtailed, meaning property values by definition will ease. 

 

The simple fact is the British economy has yet to feel the full effect of its largest recession since 1709, and we must remain considerate about the long-term effects of the economy (and unemployment levels) on the property market.

 

These are interesting times for the Southampton property market. If the price you want to achieve for your Southampton home is the most important thing, now as opposed to 2022 might be a good time to consider placing your property on the market.

 

Don’t forget, you can still put your Southampton property on the market, find a buyer and then go and see what is available to buy. Many buyers will wait for you to find a property, yet if they can’t/won’t – you won’t be made homeless. English property law means you can still come away from the sale and you won’t be forced to sell. If you would like to know a bit more about that or any aspect of buying or selling property in Southampton, drop me a message or call me.

CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

 

If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.

 

If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.

 

 

Don't forget to visit the links below to view back dated deals and Southampton Property News.

 

Blog, http://southamptonproperty.blogspot.co.uk/

 

Facebook, https://www.facebook.com/belvoirsouthampton/

 

Twitter, https://twitter.com/sotonbelvoir

 

LinkedIn, https://www.linkedin.com/in/brianlinehan

 

Website, https://www.belvoir.co.uk/offices/southampton

Lessons for landlords in Southampton from the wealthiest person in the world

A landlords’ advice article published recently said property investors need to think more like the Amazon founder Jeff Bezos.

The billionaire businessman is renowned for his long-term thinking. He thinks decades ahead, and let’s face it, he’s not doing too bad, is he?

The article said landlords should retain good tenants at a reasonable rate rather than aim to get the highest rents in the short term. It’s wise advice and something we believe in.

When a landlord adopts a short-term view of their property investment, it can often lead to lasting headaches. The advice you are given can often depend on your letting agent’s philosophy.

Some agents will say things like: ‘The rental market in Southampton is on fire now. We can get you even higher rents and squeeze out every penny from tenants.’

That’s not the way we approach things. Why? Because if you hike up a person’s rent whenever possible, it may mean more money in the short run but can be more costly in the long run.

Our advice to clients and indeed anyone thinking of investing in rental property is this:

Getting higher monthly rents isn’t as crucial in the mid to long term as finding and looking after good quality tenants paying a fair rate.

Here are some of the plus points a good longer term tenant brings:

Fewer void periods.

Fewer unnecessary repair or maintenance call outs mean a reduction in the property’s running expenses.

Good tenants appreciate they are being treated fairly and respectfully, and they look after their home.

Never to be underestimated is that having a good tenant in your property reduces your stress levels.

Going for the highest monthly rent charge as a property rental strategy can often be a mistake. It is more about maximising the overall return for our landlords.

At Belvoir Southampton, we take the time to find, vet and keep good quality tenants for our landlords. This is the best way forward in the long term.

So, take a leaf out of the wealthiest person in the World’s book (Bezos was ranked #1 by Forbes magazine last month) and think further ahead when it comes to achieving rental property success.

 

*Copyright Belvoir Southampton

Are You Ready for Life after Lockdown in Southampton?

In this two-minute read, we look at how to get ready for the changes that lie ahead as restrictions continue to ease.

With the end to our arduous Covid hibernation in sight, it’s time to prepare for life in the “new normal”.

While the prospect of restrictions easing is exciting – we can’t wait to eat at Jehangir’s Restaurant and drink at The Dancing Man Pub – it will also take a little getting used to.

That’s because many of us have grown used to lockdown living; we now work from home, live in tracksuit bottoms, and tell ourselves that cutting our own hair is a good idea.

But after a year of adapting to a host of unfortunate circumstances, it’s time to adapt again – only for happier reasons. Here are a few ways to prepare for life after lockdown.

Spring clean your wardrobe

If you’ve spent the past year in leggings, jeggings, slankets, and onesies – anything with a forgiving waistline basically – now is the time to dig out your “good” clothes. Try them on and decide if you still like them and if they still fit you. Donate unwanted items to a charity shop and make any necessary purchases. You don’t have to ditch all your comfy stuff, but you will need a few pieces that will look smart in a work meeting or at a catch-up with friends.

Revamp your fitness routine

Many people kicked off the first lockdown in 2020 with a flurry of physical activity that tapered off as the pandemic dragged on and on. They’re now – understandably as it’s been a tough year – carrying a few extra pounds. If you want to shift a little weight, take your time. Start slowly and progress steadily to avoid injury. Also, focus on activities that you enjoy – they will be good for your mental health, and you’re more likely to continue with them long term.

Acknowledge stress

It may seem that with lockdown lifting, all our troubles will be over. But it’s important to be realistic with our expectations. Some of the activities that we’ve avoided over the past year such as long commutes, mingling at parties, making small talk in the work canteen – may make a return and prove stressful. If things you once took for granted now feel challenging, don’t give yourself a hard time. Talk to someone about it (lots of people will be in the same boat), and remember that we’re still navigating our way through a deadly pandemic. Be kind to other people – and yourself.

From all of us here at Belvoir, take care and stay cheerful.

COPYRIGHT BELVOIR SOUTHAMPTON 2021

 

Southampton First-time Buyers Can Now Buy Using the Government's 5% Deposit Mortgages

Yet higher mortgage rates could see Southampton buyers paying

a lot more each month for the privilege

Being a Southampton first-time buyer in the last 12 months has not been an easy thing. Just before lockdown there were 400 ‘5% deposit mortgage’ deals and first-time buyers were able to shop around to get the best deal. When the first lockdown hit, 5% deposit mortgages disappeared meaning that many Southampton would-be first-time buyers had the rug pulled from under their feet.

Today, you can count on two hands the number of mortgage deals which allow a 5% deposit. Even worse, the number of hoops one has to jump through to get a 5% deposit mortgage is very high (plus you have to pay handsomely for the privilege, with mortgage rates of at least 4.15%).

In putting down a 5% deposit, you borrow the remaining 95% as a mortgage. These 95% mortgages (or Loan to Value) were very popular with Southampton first-time buyers before the Credit Crunch. Nearly 1 in 6 mortgages were 90% to 95%+ Loan to Value mortgages in 2007 (15.5%), yet as the Global Financial Crisis hit in 2008/9 that dropped to only 1 in 63 mortgages being in 90% to 95%+ range in 2010 – meaning many Southampton first-time buyers were unable to buy their first Southampton home between 2010 and 2015.

 

Yet in the recent Budget, Rishi Sunak has vowed to back the building societies and banks so that they can offer more of these higher 95% Loan to Value mortgage deals.

Many people have said, this will mean there will be a Southampton house price boom – especially as the Stamp Duty holiday is extended until September

This scheme is nothing new as a practically identical scheme was launched by George Osborne in the 2013 Budget with his Help to Buy Scheme. Nearly one in five houses sold in the year after that budget used this scheme, yet Osborne’s was only for first-time buyers and it was only for brand new homes (not second-hand homes). Whilst there is no doubt this caused an increase in house purchases, many commentators said it was a backdoor method to keep the country’s new homes builders afloat.

The big difference with this new 2021 scheme is that it is available for Southampton second-hand homes as well and is open to all Southampton owner occupiers moving home

But the big question is, what interest rate will the banks’ charge?

Although no building societies or banks have yet publicised the mortgage rates they will charge, all the High Street lenders including NatWest, Santander, HSBC, Virgin Money, Barclays and Lloyds have stated they intend to offer these 95% LTV mortgages.

Under the Government’s mortgage guarantee to the Banks, Westminster will guarantee 20% of any mortgage offered at 95% Loan to Value. In principle, that means that building societies/banks should be able to offer the low mortgage rates as those available to people wanting to borrow 75% Loan to Value.

At the moment the average five-year fixed rate mortgage is 3.6%with a 10% deposit but if you have a 25% deposit, you can fix forfive years at 1.63%

However, don’t forget though that the banks will be charged a ‘still to be decided’ amount to use the Government guarantee. On the last Help to Buy Scheme, it was rumoured they were charged 0.9% of the mortgage borrowed, so this cost would have to be passed on to the first-time buyer. I would suspect the eventual rates Southampton first-time buyers will have to pay will be somewhere in the region of 3%.

This new 95% mortgage/5% deposit scheme is only going to work if the banks and building societies have sensible mortgage rates as it needs to help those Southampton first-time buyers it was intended to benefit, who are finding it hard work to get on the first rung of the Southampton housing ladder.

It all comes down to how anxious the banks and building societies feel about the true long-term effect of the pandemic once the furlough scheme ends in the autumn. Only time will tell.

Yet, to give you an idea of the difference the mortgage rates scheme will make on a typical Southampton terraced/town house …

the average price paid for a Southampton terraced inthe last 12 months was £238,900

Assuming a 35-year repayment mortgage and borrowing that amount on each scenario:

1. At the current best 95% LTV mortgage rate (i.e. 5% deposit) of 4.15% mentioned at the start of the article, that would cost £1,079 per month in mortgage payment
2. At the current average 90% LTV mortgage rate (i.e. 10% deposit) of 3.6% mentioned in the middle of the article, that would cost £1,001 per month in mortgage payment
3. At the best 75% LTV mortgage rate (i.e. 25% deposit) of 1.63% mentioned at the start of the article, that would cost £747 per month in mortgage payments

As you can see, quite a difference.

 I have to applaud Rishi Sunak for this initiative, yet will it be ‘fields of clover forever’ for the Southampton property market with the new scheme? Well no, it won’t be!

It will be a good boost to the Southampton (and UK as a whole) property market. Whilst the mortgage guarantee offers a small portion of security for the lenders, it does focus on the riskiest part of the housing market. Many lenders still have cold shivers of the Northern Rock 125% mortgage debacle from a decade ago and those memories still ring true today.

The fact is these types of mortgages will be a higher risk, even if the Government are underwriting them with their smaller deposits, which will come through in bank’s and building societies higher pricing for these mortgages. Also, the lenders are already at near full capacity trying to get hundreds of thousands of existing property sales and purchase deals through because of the Stamp Duty rush over the last 9 months. I await the rates in early April and will make comment again.

If you are a Southampton homeowner, potential Southampton first-time buyer or anyone involved in the Southampton property market and you would like to chat about anything I’ve covered in this article or any of my other articles on the Southampton property market, please don’t hesitate to drop me a line.

Don't forget to visit the links below to view back dated deals and Southampton Property News.

 

Blog, http://southamptonproperty.blogspot.co.uk/

 

Facebook, https://www.facebook.com/belvoirsouthampton/

 

Twitter, https://twitter.com/sotonbelvoir

 

LinkedIn, https://www.linkedin.com/in/brianlinehan

 

Website, https://www.belvoir.co.uk/offices/southampton

Southampton Home Buyers £12,250,554 Windfall as Stamp Duty Holiday Stretched to September...

... and new 5% deposit mortgages for

Southampton first-time buyers

   CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

The Chancellor Rishi Sunak announced two initiatives to keep the Southampton property market firing on all cylinders into 2021. 

Firstly, the £500,000 zero-rate Stamp Duty band has been extended to the 30th June 2021. After then it will phase down to £250,000 for an additional three months, returning to the pre-pandemic levels on the 1st October 2021. Secondly, Mr Sunak announced a scheme that will allow Southampton first-time buyers to buy their Southampton home with a 5% deposit from this April. Let me look at what each initiative means to the Southampton property market.

1. Stamp Duty Holiday extension for Southampton home buyers

Coming out of the first lockdown in the early summer of 2020, there was a lot of apprehension that the British property market would flounder. Therefore, when the Stamp Duty Holiday was announced back in July 2020 to boost the property market, the deadline was set at the 31st March 2021.  Little did anyone know of the snowball effect of people wanting to move because of the initial lockdown in the spring of 2020, the pent-up demand following the conclusion of the EU negotiations with the subsequent ‘Boris Bounce’ and then the Stamp Duty Holiday which made the perfect storm for what has been the busiest property market in Southampton since 2001/2.

The average stamp duty paid by a

Southampton homebuyer is £5,373

The reason the Stamp Duty extension is important is that many estate agents and solicitors have been warning for the last couple of months that home buyers would pull out of property deals or renegotiate if they could not complete their sale in time before the Stamp Duty Holiday ended.

So, by phasing down the Stamp Duty Holiday, this will allow some breathing space for burdened solicitors and mortgage lenders, thus decreasing the number of buyers pulling out of their property purchase because they unexpectedly have to find up to an extra £15,000 in Stamp Duty when property sales do not complete on time.

There are currently 2,280 properties that are sold STC in Southampton alone and the vast majority of those will save money on their stamp duty because of this extension

So, what does the Stamp Duty extension mean for Southampton house prices?

The extension has heightened confidence in the Southampton property market. The Government watchdog ‘The Office for Budget Responsibility’, has predicted that house prices in 4 years’ time will be just over 13% higher, compared to the pre-Christmas predicted figure  of 11% growth (over the same time frame).

2. 5% deposit mortgages for Southampton first-time buyers

From next month, Southampton first-time buyers will be able to buy Southampton homes worth up to £600,000 with a 5% deposit and a Government-backed mortgage with a fixed rate of up to 5 years.

Rishi Sunak wants to turn the millennial ‘Generation Renters’ into ‘Generation Buyers’ and believes this initiative should be able to help two million people get on the property ladder. When we look at what that would mean for Southampton, I estimate …

8,167 Southampton people could be helped onto the

Southampton property ladder with these 5% deposit mortgages

The Government backed scheme will be open to Southampton first-time buyers for 21 months (until the end of 2022) and available from lenders including NatWest, Lloyds and HSBC (plus others to be announced soon). It will be available on all Southampton homes new or second hand (previous schemes applied to new homes only).

5% deposit mortgages were all but withdrawn from the market at the start of the pandemic in spring 2020 with an almost default minimum deposit of 10% (even as high as 15% in the autumn just gone) putting homeownership out of reach for all but the wealthiest Southampton first-time buyers.

I must admit I found it a scandal that homeownership among the 25 to 34 year olds plummeted from 69% in 1981 to 36% by 2014, although with certain Government incentives and low interest rates since then, that had risen to 41% by last year, but it’s not enough

With so many young families paying huge sums in rent, who could effortlessly afford to make mortgage repayments on the same property, they haven’t been able to save enough for a 10% initial mortgage deposit, let alone 15%.

Yet now with these new 5% deposit mortgages, many Southampton first-time buyers will be able to afford to buy their first home in Southampton. Banks will typically lend between four and a half and five times the gross annual income – this means with a modest 5% deposit; many Southampton 20 and 30 somethings will now be able to buy their first home. Just before I finish this topic, the 5% deposit mortgages will also be available to current Southampton homeowners who don’t have the equity built up in their existing home – thus helping second or third (or more) time Southampton buyers as well.

How do both these changes effect Southampton buy-to-let landlords?

I know many of you Southampton landlords are adding to your Southampton rental portfolio because of the Stamp Duty Holiday and with the extension, you too will save some money from it. The issue of first-time buyer mortgages does mean the demand for private rented accommodation in Southampton might not be as strong in the coming decade. 

Don’t get me wrong, tenant demand will continue to outstrip supply of Southampton rental properties for the foreseeable future, yet the tenant/landlord balance could alter slightly in the medium term. Southampton landlords need to take a long hard look at their properties and ascertain if they are fit for purpose both now and into the 2030’s. Tenants are becoming a lot more demanding of what their rental property offers. Wood chip wallpaper, avocado green bathroom suites and kitchens fitted in the 1990’s (or before) simply won’t cut the mustard in the next decade. 

The demand from Southampton tenants for properties with larger gardens, or the ability to keep pets or an extra reception room garden/office to allow them to enjoy their rented home more and also being able to work from home will ensure greater demand for your rental property … and the best bit, they will pay handsomely for that in higher rent.

If you are a Southampton homeowner, buyer, tenant or landlord and you want to discuss your options on selling, buying or renting a property in Southampton and the surrounding area, do not hesitate to contact me personally.

   CLICK HERE TO FIND OUT HOW MUCH YOUR SOUTHAMPTON PROPERTY IS WORTH

 

If you would like to pick my brains on the Southampton Property Market – Just drop me a line on social media or email me @ brian.linehan@belvoir.co.uk you can also call me on 023 8001 8222.

 

If you are looking for an agent that is well established, professional and communicative, then contact me to find out how we can get the best out of your investment property.

 

 

Don't forget to visit the links below to view back dated deals and Southampton Property News.

 

Blog, http://southamptonproperty.blogspot.co.uk/

 

Facebook, https://www.facebook.com/belvoirsouthampton/

 

Twitter, https://twitter.com/sotonbelvoir

 

LinkedIn, https://www.linkedin.com/in/brianlinehan

 

Website, https://www.belvoir.co.uk/offices/southampton