My thoughts on the future of the Southampton buy-to-let market

I was recently reading a report by the ‘Home’ website which suggested that hordes of Landlords are selling their buy-to-let investments due to increasing burdens placed on them within in the buy-to-let market. Their findings suggested that the number of new properties that came onto the UK market, for sale, jumped by 11% as a result.

Increasing burdens include new tax rules coming in over the next 3 to 4 years. In a bid to heighten standards in the private rental sector Westminster has also announced that all self-managing Landlords (i.e. Landlords that don’t use a letting agent to look after their buy-to-let property) will soon need to register with a compulsory redress scheme to resolve tenant arguments and disputes.

Interestingly, I was chatting with a self-managed Landlord from Chilworth when I was out socially over the festive period. He wasn’t aware of other recent legislation that has hit the private rental sector, including the ‘Right to Rent’ regulations which came into operation last year. Landlords have to certify that their tenants have the legal right to live in the UK. This includes checking, and taking copies of, their tenant’s passport or visa before the tenancy is signed. Of course, if you use a letting agent to manage your property, they will usually sort this for you, as they will with the redress scheme when it is implemented.

If you are a self-managed Landlord the consequences for non-compliance are severe; if you let a property to a tenant who is living in the UK illegally, you will be fined up to £3,000! That same Chilworth Landlord popped into my offices in the New Year, and I checked all his paperwork to ensure that he is on the right side of the law going forward. I offer the same to any Landlord in the Southampton area – if you want me to cast my eye over your buy-to-let matters there will be no charge – just bring in some chocolates for the office team!

But what of all these extra properties being dumped onto the market in Southampton? When I looked at the records the number of properties on the market in now, as opposed to a year ago, tells an interesting story…

	1st Jan 2017	1st Jan 2018
Detached	286	329	15%
Semi	240	264	10%
Terraced	118	146	24%
Flat	512	548	7%
Plots + Other	82	67	-18%
Total	1238	1354	9%

  

Overall, Southampton does match the national trend, with the number of properties on the market actually rising by 9% in the last year.  It was particularly interesting to see the number of terraced properties increase by 24%, yet the number of flats rise by just 7%.

However, speaking with my team and other property professionals in the city, the majority of that movement in the number of properties, and the types of properties on the market, isn’t down to Landlords dumping their properties onto the market. The whole property market has changed in the last 12 months, with the majority due to the owner-occupier market rather than Landlords - a subject I will write about soon in my Southampton Property Market blog. You see, for the last ten years, each month there has always been a small number of Southampton Landlords who have been releasing their monies from their Southampton buy-to-let properties, as is the nature of all investments!

Nationally, the number of rental properties coming onto the market to rent fell by 16% in Q4 2017 compared to Q4 2016. But that isn’t because there are 16% less rental properties to rent – it’s because tenants are staying in their rental properties for longer, in turn causing less properties to be put onto the market for RE-LET.

Nevertheless, some Southampton Landlords will want to release the equity held in their Southampton buy-to -let properties in 2018. All I suggest is that you speak with your letting agent first - putting a rental property on the open market often spooks the tenants to hand in their notice days after you put the property on the market because they don’t like the uncertainty and also believe they will become homeless! The result of this is that you could end up with an empty property, costing you money with no rental income.  However, some letting agents who specialise in portfolio management have select lists of Landlords that will buy with sitting tenants in. If you have a portfolio in the Southampton area and are considering selling some or all of your properties – drop me a line as I might have a portfolio Landlord for you, allowing you peace of mind that you won’t experience any rental voids. 

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

Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.

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

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

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Website, https://www.belvoir.co.uk/letting-agents-southampton  

Youngsters unable to buy their first home in Southampton – are the Baby Boomers and Landlords to blame?

Talk to many Southampton 20-somethings, where home ownership has looked but a vague dream, and they’ll feel vexatious towards the Baby Boomer generation and their pushover ‘easy go lucky’ walk through life; jealous of their free university education with grants, their eye-watering property windfalls, their golden final salary pensions and their free bus passes…

If you had bought a property in Southampton for say £17,000 in the first quarter of 1977, today it would be worth £373,612 - a windfall increase of 2097.7%!

But to blame the 60 and 70 year olds of Southampton for that sort of rise seems a little unfair. With the value of the homes rising like a rocket, I don't believe they can be censured or made liable for that. In my blog a few weeks ago, I discussed the number of people in the Southampton area who have two or more spare bedrooms (meaning they are under-occupying the house). I see many mature members of Southampton society, rattling around in large 4/5 bed houses where the kids have flown the nest years ago. But should they be blamed?

We are all human, and the mature members of UK society have just reacted to the inducements of our property and tax system. Those who joined the property market party in the 1970’s and 1980’s were able to take out huge mortgages, protected in the knowledge that inflation would corrode the real value of the mortgage, while wage gains would boost their ability to repay.

And neither do I directly blame the multitude of Southampton buy-to-let Landlords, purchasing their 10th or 11th property to add to their empire. They too, are humbly reacting to the peculiar historic inducements of the UK property market.

So, who is to blame?

Well, hyperinflation in the 1970s meant the real value of people’s mortgages were wiped out (as mentioned above). Margaret Thatcher and Nigel Lawson could also shoulder the blame with Maggie selling off millions of council houses and Nigel Lawson’s delayed ending of the MIRAS tax relief in 1987. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precludes a more efficient distribution of the current housing stock. The Government has had plenty of opportunity to change the draconian stamp duty rules to incentivise those mature Southampton house movers to downsize.

However, I have started to see over the last few years a change in Government policy towards housing. The new breed of Southampton buy-to-let Landlords that have come about since the Millennium, have had their wings clipped over the last couple of years, with the introduction of new tax rules. These new rules make it slightly more difficult to profit from property unless you have all the national information and Southampton property trends to hand.

It’s easy to think the only reason that hundreds of first-time buyers have been priced out of the Southampton housing market is because of Landlords. Yet, I believe Landlords have been unappreciated for the Southampton homes they provide for Southampton people. With first-time buyers struggling to save for a deposit, if it weren’t for Landlords buying up homes over the last 10-15 years, we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have had to cut services, so certainly didn’t have enough money to build new homes - homes that were provided to Southampton by buy-to-let Landlords.

  

One side of the argument is that 1,026 homes are being bought by buy-to-let Landlords each year in the Southampton City Council area which might otherwise have become available to other buyers. The other side of the argument is that the current national average deposit is £51,800, which is, by far, the greatest barrier to those wanting to buy their first home. Those homes bought by local buy-to-let Landlords are not left idle, as they equate to 7,179 of new homes for local people, most of whom see renting as a better option because of the choice, simplicity and flexibility which renting brings.

In the 60s, 70s and 80s, the traditional thoughts that you were a failure unless you owned your own home have now all but disappeared, because if you ask many young people, they would probably say renting was the perfect option for them at certain times of their life. 

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

Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.

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

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

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Southampton Apartments are 8.9% more affordable than 10 years ago

My research shows that certain types of Southampton property are more affordable today than before the 2007 credit crunch.

Roll the clock back to 2007 just before the credit crunch hit which saw Southampton property values plummet like a lead balloon and the Southampton property market had reached a peak with the prices for Southampton property hitting the highest level they had ever reached.  Between 2008 and 2010, Southampton property values lay in the doldrums and only started to rise in 2011, albeit quite slowly to begin with.

Nevertheless, even though property values have now passed those 2007 peaks, my research indicates that Southampton property, especially flats/apartments, are now more affordable than they were before the 2008 credit crunch.

Back in 2007, the average value of a Southampton flat/apartment stood at £153,383 and today, it stands at £179,500, a rise of £26,117 or 17%.

However, between 2007 and today, we have experienced inflation (as measured by the Government’s Consumer Price Index) of 25.97% meaning that in real spending power terms Southampton apartments are 8.9% more affordable than in 2007. Looking at it another way, if the average Southampton apartment (valued at £153,383 in 2007) had risen by 25.97% inflation over those 10 years, today it would be worth £193,217 (instead of the current £179,500).

The point I’m trying to get across is that Southampton property is more affordable than many people think.  Southampton first time buyers can get on the ladder as 95% mortgages have been readily available to first-time buyers since 2010.

It really comes down to a choice and if Southampton first-time buyers can get over the hurdle of saving the 5% deposit for the mortgage on the property – they will be on to a winner, especially with these ultralow mortgage interest rates, a mortgage can be between 10% and 30% cheaper per month than the rental payments on the same house.

So why aren’t Southampton 20 somethings buying their own home?

Back in the 1960’s and 1970’s, renting was considered the poor man’s choice in Southampton (and the rest of the Country) a huge stigma was attached to renting. However, over the last 10 years as a country, we have done a complete U-turn in our attitude towards renting - meaning that many people find renting a better option and a lifestyle choice.

Saving the 5% deposit means going without many luxuries in life (such as holidays, every satellite movie and sports channel, socialising or the latest mobile phone – even if only in the short term) therefore instead of saving every last pound to put towards a mortgage deposit Southampton 20 somethings choose to rent.

There is no denying the simple fact that over the next 10 to 15 years, the people who choose to rent instead of buy in Southampton will continue to rise.

Therefore, everyone in Southampton has a responsibility to ensure that an adequate number of quality Southampton rental properties are safeguarded to meet those future demands. Interestingly, what I have noticed though over the last few years are the expectations of Southampton tenants on the finish and specification of their Southampton rental property.

I have perceived that in the past, what a tenant wanted from their Southampton rental property was moderately unassuming because renting a property was only a short-term choice to fill the gap before jumping on the property ladder. Before the millennium, wood chip wall paper and twenty-year-old kitchen and bathroom suites were considered the norm.

However, Southampton tenants’ expectations are becoming more discerning as each year goes by.  I have also noticed the length of time a tenant remains in their Southampton property is becoming longer (and this was backed up recently by stats from a Government Report), although I have noticed a tendency for many Southampton landlords not to keep the rental payments at the going market rates  - maybe a topic for a future article for my blog?

The bottom line is this … Southampton landlords will need to be more conscious of tenants needs and wants and consider their financial planning for future enhancements to their Southampton rental properties over the next five, ten and twenty years -  e.g. decorating, kitchen and bathroom suites etc etc ..

The present-day and future situation of the Southampton private rental property market is important, and I frequently liaise with Southampton buy-to-let investors looking to spread their Southampton rental-portfolios. I also enjoy meeting and working alongside Southampton first time landlords, to ensure they can navigate through the minefield of rental voids, the important balance of capital growth and yield and ensuring the property is returned back to you in the future in the best possible condition.

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

Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.

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/belvoirlettingssouthampton/

Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan

Website, https://www.belvoir.co.uk/letting-agents-southampton  

78.09% of Southampton is Built on ... Building Plot Dilemma or Not?

Well the fallout from the recent Budget is still continuing.  I was chatting to a couple of movers and shakers from the Southampton area the other day, when one said, “There isn’t enough land to build all these 300,000 houses Philip Hammond wants to build each year”.

...and if you read the Daily Mail, you would be forgiven for thinking the Country was at bursting point ... or is it?

It was 60 years ago the first satellite was launched (Sputnik). All the Superpowers have used them to take high definition pictures of each other for decades, but now satellites and their high-powered cameras are being used for more peaceful purposes. The European Environment Agency (EEA) have been taking high definition pictures of the UK from outer-space to give us a focused picture of what every corner of the Country really looks like … and the findings will come as a surprise.

As my blog readers know, I always like to ask the important questions relating to the Southampton property market. If you are a Southampton landlord or Southampton homeowner, this knowledge will enable you to make a more considered opinion on your direction and future in the Southampton property market. Like every aspect of all economic life, it’s all about supply and demand, because over the last twenty or so years, there has been an imbalance in the British (and Southampton) housing market, with demand outstripping supply, meaning the average value of a property in Southampton has risen by 361.88%, taking an average value from £44,600 in 1995 to £206,000 today.

Using the information from the EEA and data crunched by Sheffield University with their Corine-Land Cover project, I posed them a few questions about the local area, interesting questions I would like to share with you …

1. What proportion of the whole of Southampton is built on?

78.09%

That surprised you, didn’t it! In the study, land classified as ‘urban fabric’ defined has land which has between 50% and 100% of the land surface is built on, (meaning up to a half might be gardens or small parks, but the majority is built on).

2. How much land is intensively built on locally?

Of that amount mentioned above, how much of it is high-density urban fabric? (i.e. where 80% to 100% is built on – still leaving 20% for gardens)  3.52%  - again I bet that surprised you!

3. So how is the land used locally?

Industry                                 0.85%

Sports Facilities                    2.99%

Pastures                                 4.32%

Port Areas                             10.14%

...the rest being made up of various other minor types such as forests and airports, etc.

Southampton and the surrounding areas are greener than you think! In fact, I read that property covers less of the UK than the land revealed when the tide goes out. The assumption that vast bands of our local area have been concreted over doesn't stand up to inspection. However, the effect of housing undoubtedly spreads beyond its actual footprint, in terms of noise, pollution and roads.

Now I am not suggesting for one second we pour concrete over every inch of the locality, but the bottom line is we, as a country, are growing at a quicker rate than the households we are building. I appreciate the emotional effect of housing is greater than other land use types because most of us spend the vast majority of our time surrounded by it. As Brits, we live our lives driving along roads, walking on footpaths and working and living in buildings meaning we tend, as a result, to considerably overemphasise how much of it there is.

In fact, I was only flying home recently back from a short break abroad, when I looked down and I was reminded just how green Britain actually is!

The bottom line is Southampton people and the local authorities are going to have to put their weight into building more homes for people to live in. There is going to have to be some give and take on both sides, otherwise house prices will continue to rise exponentially in the future and Southampton youngster’s won’t be able to buy their own Southampton home, meaning Southampton rents and demand for private rented accommodation in Southampton can (and will) also grow exponentially. 

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

Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.

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/belvoirlettingssouthampton/

Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan

Website, https://www.belvoir.co.uk/letting-agents-southampton  

Southampton Property Market and Hammond’s Budget Promise to Build 300,000 more homes

I miss the good old days of George Osborne as Chancellor, with his hardhat and hi-vis jacket. He must have visited every new home building site in the UK with his trademark attire! For the last few years, the nearest Philip Hammond got to donning a ‘Bob the Builder’ outfit was at his grandchild’s birthday party. However, with what appears to be a change in focus by the Tories to ensure they get back in power in 2022, they appear to have fallen in love with house building again with the Chancellor’s promise to create 300,000 new households in a year.

Nationally, the number of new homes created has topped 217,344 in the last year, the highest since the financial crash of 2007/8. Looking closer to home: in total there were 997 ‘net additional dwellings’ in the last 12 months in the Southampton City Council area, a decent increase of 167% on the 2010 figure.

 

The figures show that 70% of this additional housing was down to new build properties. In total, there were 699 new dwellings built over the last year in Southampton. In addition, there were 383 additional dwellings created from converting commercial or office buildings into residential property and a further 36 dwellings were added as a result of converting houses into flats.

While these all added to the total housing stock in the Southampton area, there were 121 demolitions to take into account.

Net additional dwellings in Southampton in the last 12 months
New build	Conversions	Change of use	Demolitions	Net Additions
699	36	383	-121	997

I was encouraged to see some of the new households in the Southampton area had come from a change of use. The planning laws were changed a few years back so that, in certain circumstances, owners of properties didn’t need planning permission to change office space in to residential use.

With the scarcity of building land available locally (or the builders being very slow to build on what they have, for fear of flooding the market), it was pleasing to see the number of developers that had reutilised vacant office space into residential homes in the local council area. Converting offices and shops to residential use will be vital in helping to solve the Southampton housing crisis especially, as you can see on the graph, that the level of building has hardly been spectacular over the last seven years!  

Now we have had the autumn budget, Theresa May and Philip Hammond have set out their stall with housing as their key focus. I was glad to see the Government introducing a variety of changes to improve housing, including more funding for the supply side and an injection of urgency into the planning system.

The biggest question is, just where are the Government going to build all these new houses? Maybe a topic for a future article?

Back to the main point though and the focus on the housing market by the Tory’s is good news for all homeowners and buy to let landlords, as it will encourage more fluidity in the market in the longer term, sharing the wealth and benefits of homeownership for all. However, in the short term, demand still outstrips supply for homes and that will mean continued upward pressures on rents for tenants.

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

Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.

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/belvoirlettingssouthampton/

Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan

Website, https://www.belvoir.co.uk/letting-agents-southampton  

Southampton Rents Set to Rise to £1,553 pm in Next 5 Years

It’s now been a good 12/18 months since annual rental price inflation in Southampton peaked at 3.4%. Since then we have seen increasingly more humble rent increases. In fact, in certain parts of the Southampton rental market over the autumn, the rental market saw some slight falls in rents. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may now be starting to buck that trend?

Well, possibly in the short term, but in the coming few years, it is my opinion Southampton rents will regain their upward trend and continue to increase as demand for Southampton rental property will outstrip supply, and this is why.

The only counterbalance to that improved rental growth would be to meaningfully increase rental stock (i.e. the number of rental properties in Southampton). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, that means buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning less new properties will be bought to let out).

Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would in fact drop throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords looked to kick their tenants out, sell up and invest their capital elsewhere. (Although ironically that would lower supply of rental properties, decreasing the supply, meaning rents would increase again!).

Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Southampton, that Southampton landlords are (instead of selling up on masse), actually either (1) re-mortgaging their Southampton buy-to-let properties instead or (2) converting their rental portfolios into limited companies to side step the new taxation rules.

The sentiment of many Southampton landlords is that property has always weathered the many stock market crashes and runs in the last 50 years. There is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and crypto-currency (e.g. BitCoin). 

Remarkably, there is some good news for tenants, as Tory’s recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth.  It really is swings and roundabouts!

So, what does this all mean for landlords and tenants in Southampton? In my considered opinion,

Rents in Southampton over the next 5 years will rise by 9.2%, taking the average rent for a Southampton property from £1,422 per month to £1,553 per month.

To put all that into perspective though, rents in Southampton over the last 12 years have risen by 21.5%. In fact, that rise won’t be a straight-line growth either, because I have to take into account the national and local Southampton economy, demand and supply of rental property, interest rates, Brexit and other external factors. Please see the graph for my projections

  

   

In the past, making money from Southampton buy-to-let property was as easy as falling off a log. But with these new tax rules, new rental regulations and the overall changing dynamics of the Southampton property market, as a Southampton landlord, you are going to need to work smarter and have every piece of information, advice and opinion to hand on the Southampton, Regional and National property market’s, to enable you to continue to make money. 

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

Email me on brian.linehan@belvoirlettings.com or call on 023 8001 8222.

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/belvoirlettingssouthampton/

Twitter, https://twitter.com/sotonbelvoir
LinkedIn, https://www.linkedin.com/in/brianlinehan

Website, https://www.belvoir.co.uk/letting-agents-southampton