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Thursday, 30 May 2019

New Home Building in Southampton 2018 rises to 4.5% above the post Millennium average




Nationally, the number of new homes created in 2018 was 222,194, the highest since 1989. Yet since 2002, the average number of properties built in the UK has only been 146,700 per year. You would think, seeing all the new homes sites around, you could ask are we building too many houses, especially off the back of those impressive 2018 build figures? However, to keep up with the ever-growing population, lifestyles and people living longer, official reports state the Country actually needs 240,000 new homes built every year to just stand still.

It is estimated, by the Chartered Institute of Housing, that the current national backlog of new homes required is in the order of 4.7 million (i.e. because of the bottled-up household formation by younger adults living with parents, shared housing and unaffordability). As a Country, we cannot meet all these needs immediately and it will take time to build up an effectual plan to address these issues.

Looking closer to home, you will also see from the graph below the long-term trend of new homes building (the yellow dotted line) has been going in an upward direction. In fact, the 2018 new homes build stats for Southampton are 4.5% above the post Millennium average.


But, we still need more homes… yet who is going to build (and pay) for them. Some Southampton people will say why can’t the local authority build most of them?

In 2018, 826 new dwellings were created in the Southampton Council area and of those 826; interestingly 45 were Council and Housing Association homes

So, if our local authority had a more ambitious annual target of say an additional 500 homes on top of those figures, where could they be built and how would they be paid for? Of course, there are the normal apprehensions about infrastructure issues such as roads, schools, hospital capacity and doctors’ surgeries but our local authority has a Local Plan and that has the locations of where they envisage the new housing will be built (and the infrastructure that goes with it).

The Tories lifted the cap on what local authorities could borrow to build Council houses in late 2018 meaning Councils could borrow more money to build more Council houses. Let’s say we built those 500 homes a year for the next 5 years in Southampton, that would cost the local authority £375 million to build, which would produce in total £17.4 million in rent. At current interest rates, the interest would be £9.5m per year leaving a surplus of £7.9m for property maintenance and management – meaning the Council houses pay for themselves!

Therefore, what does all this mean for Southampton homeowners and Southampton buy-to-let landlords?

Well, the chances of our local authority getting the full funding for an extra 500 homes a year is slim as there is only so much money to borrow. If every UK local authority got funding for 500 additional homes a year for the next 5 years, an impressive 867,500 homes would be built in those 5 years but that would require the councils to borrow £130.1bn – and Central Government doesn’t have that kind of money for Councils to borrow (more like £10bn to £15bn).

The 4.7million long term housing shortage means house prices will remain strong in the long term (despite blips like Brexit etc). Demand for private rental properties will continue to grow and if you read my recent article on Southampton rents, this can only be good news for Southampton landlords. This attention on the housing crisis by the Government is good news for all Southampton homeowners and Southampton 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 and stability on house 

If you would like to pick my brains on the Southampton Property Market – pop in for a coffee or drop me a line on social media or email. 

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

Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.

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

Friday, 17 May 2019

Southampton Buy To Let Annual Returns Hit 12.6% in Last 10 Years


Many Southampton people ponder the best places to invest their hard-earned savings and the best piece of advice I can give you is to do your homework and speak to lots of people. It depends on your attitude to risk versus reward. Normally, the lower the risk, the lower the reward whilst a higher risk is normally associated with the possibility of higher returns, yet nothing is guaranteed. At the same time, higher risk also means higher possible losses on your investment - yet if one looks at the bigger picture, the biggest threat to investing, predominantly when the investment is made in the short term, isn’t risk but actually volatility.

So where should you invest? Building society, the stock market, gold or property are options. This article isn’t designed to give you advice – just show you how different investments have performed over the last decade.

Let me start with the humble semi-detached house in Southampton ... which in 2009 was worth £185,300 … so assuming I bought that property for that figure, then I looked at what if I had invested the same amount of money in a building society, into gold and finally the stock market…

Putting your money into the stock market (FTSE100) would have brought a return of 30.2% on your capital over those 10 years and an average of 3.79% a year in dividends (making an overall increase of 74%).

Gold doesn’t earn interest – yet it has increased in value by 26.9% over the same 10 years whilst putting your money in the building society, the money hasn’t increased in value, but would have earned you interest of 24.46% or the equivalent of 2.21% per year.

Investing in an average semi-detached house in Southampton over the last 10 years has seen the capital increase by 53% (an equivalent of 4.34% per annum) and the income (i.e. the rent) has provided a return, based on the original purchase price, of 121.15% or the annual equivalent of 8.26% … meaning the overall return, based on the original purchase price of an average semi-detached property in Southampton, is 12.6% per annum.




Notwithstanding No.11 Downing Street’s grab at the profits of buy to let landlords by hitting the buy to let sector with several fiscal punishments with a 3% stamp duty level, a decrease in high rate tax relief for landlords and an increase in rate of CGT on residential property profits, the facts remain that ‘bricks and mortar’ is still one of the preeminent and most constant investments available.

The bottom line is, the buy to let investment remains the mainstay of the British property market, serving to support aspiring homeowners as they work to conquer the, sometimes difficult, financial obstacles of home ownership. With Central Government over the last 30 years only paying lip service to address the lack of new homes being built or tackling the affordability on a consequential scale, it is highly probable this will continue for the next 5/10/15 years as there will always be a call for a respectable, and above all, honest buy to let landlords delivering decent housing to those that need it.

If you would like to pick my brains on the Southampton Property Market – pop in for a coffee or drop me a line on social media or email. 

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

Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.

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



Friday, 3 May 2019

Which Southampton Properties are Selling the Best?



Moving home is said to be the third most stressful life event, following a member of your family dying or getting divorced. So it is always best to keep your stress levels down by investigating and doing your homework on both the particular area of Southampton (or nearby conurbations) where you live (i.e. where you are selling) and where you want to search for your next Southampton home. Being mindful of how fast (or slow) the different aspects of the Southampton property market is moving is key.. because it could save you much heartache and many thousands of pounds.

You see, if you know you are selling a property in a sluggish price range and buying in a faster moving price range in Southampton then putting your property on the market first is vital, otherwise you will always find the one you want to buy tends to sell before your property sells - there is nothing worse than pondering over a property only to find that someone else has bought it. Being primed with all the knowledge is key. On the other side of the coin, if you are selling in a fast moving market and buying in a sluggish market .. you can probably get a better deal on the one you are buying.

For buy to let landlords in Southampton, this evidence is particularly critical as purchasing a high-demand property in a well-liked area of Southampton will safeguard a surfeit of availability of tenants, as well as respectable house price growth. 
Being an agent in Southampton, I like to keep an eye on the Southampton property market on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Southampton; be that a buy to let property for a landlord or an owner occupier house.  So, I thought, how could I scientifically split the Southampton housing market into sections, so I could analyse which part of the Southampton property market was doing the best (or the worst).

I took the decision that the preeminent way was to fragment the Southampton property market into roughly four uniform size price bands (in terms of properties for sale). Each price band would have roughly around 25% of the property in Southampton available for sale .. then add up all the sold (stc) properties and see which sector of the Southampton property market was performing best? … And these were the results ..



The best performing price range in Southampton is the lower market up to £180,000 where 46.2% of all property in that price range has a buyer and is sold stc.

It’s not unexpected that the upper end of the property market (the top 25%) in Southampton is finding things a little tougher compared to the others. Even though the number of first time buyers in 2018 did increase over the 2017 levels, it was from a low starting point and the large majority of 20 to 30yo’s don’t want to or can’t buy their first home and the local authority has no money to build Council houses meaning an increase in demand as private landlords take up the slack – because everyone needs a roof over their head!


If you would like to pick my brains on the Southampton Property Market – pop in for a coffee or drop me a line on social media or email. 

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

Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.

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

Friday, 26 April 2019

What Has Happened to the Southampton Property Market Since the Last Property Market Crash?



A handful of Southampton landlords and homeowners have been asking me what would happen if we had another property crash like we did in 2008/9?

The UK property crash in 2008/9 caused property prices in the UK to drop by an average of 18.37% in a period of 16 months.

On the run up to the Parliamentary vote on Brexit, a number of people asked what a no-deal Brexit would do to the property market and if there would be a crash as a result. I have discussed in a previous article on the chances of that (slim but always a possibility) … but assuming it happens, it is my opinion the outcome of a no-deal Brexit would be no worse than the country’s 2008/9 credit crunch property crash, the late 1988 property crash, the 1974 property crash, 1951 property crash … I could go on. The British economy would bounce back from the shock of a no-deal Brexit with lower property values and a continued low interest rate environment (together with an additional round of Quantitative Easing) and that would mean we would see a similar bounce back as savvy buyers saw it as a fantastic buying opportunity.

So, let me explain the reasons I believe this...

Many said after the Brexit vote in June 2016, we were due a property crash - but we all know what happened afterwards.

Initially, let’s see what would happen if we did have a crash, how quickly it would bounce back and then finally discuss how the chances of a crash are actually quite minimal.

Therefore, to start, I have initially split down the types of property in Southampton (Det/Semi etc.) and in the red column put the average value of that Southampton property type in 2009. Next in the orange column what those average values are today in 2019.


Now, assuming we had a property crash like we did in 2008, when average property values dropped nationally by 18.37%, I applied a similar drop to the current 2019 Southampton figures (i.e. the green column) to see what would happen to property values by the middle 2020 (because the last crash only took 13/14 months).

…and finally, what would subsequently happen to those same property prices if we had a repeat of the 2009 to 2014 property market bounce back.


                                                                                       
Of course, these are all assumptions and we can’t factor in such things as China going pop on all its debt ... yet either way, the chance of such a crash coming from internal UK factors are much slimmer than in another of the four property crashes we have experienced in the last 80 years. Why, you might ask?

The seven reasons I believe are these …

1.      The new Bank of England mortgage rules on lending in 2014 to address reckless lending that fuelled that last crash.
2.      Low inflation.
3.      Low mortgage rates (the average Brit’s fixed rate mortgage is currently 2.26% and the variable rate mortgage of 3.07%).
4.      Wage rises are forecast to continue to outgrow inflation.
5.      Unemployment figures dropping to 4% (down from 8.4% in 2011).
6.      The high percentage (67.7%) of all British mortgages being on a fixed rate.
7.      And notwithstanding the distractions of Brexit over the last few years, it cannot be denied that the British economy has slowly and steadily been heading in the right direction for a number of years, built on some decent foundations of a steady housing market (unlike the 1988 and 2008 crashes when the housing market got overheated very quickly on the run up to the crashes).

So as the circumstances are much different to the last two crashes, the chances of a crash are much slimmer. Yet if we do have a crash, for the very same 7 reasons above why the chances of a crash are unlikely, those 7 reasons would definitely contribute to making the ensuing recession neither too long nor substantial in scale.

One final thought for the homeowners of Southampton. Most people when they move home, move up market, meaning in a decreasing market you will actually be the winner, as a 10% drop on yours would be much smaller in £notes than a 10% drop on a bigger property ... think about it.

One final thought for the new and existing buy to let landlords of Southampton. Well, the questions I seem to be asked on an almost daily basis by landlords are: -

·         “Should I sell my property in Southampton?”
·         “Is the time right to buy another buy to let property in Southampton and if not Southampton, where?”
·         “Are there any property bargains out there in Southampton to be had?”


Many other Southampton landlords, who are with us and many who are with other Southampton letting agents, all like to pop in for a coffee, pick up the phone or email us to discuss the Southampton property market, how Southampton compares with its closest rivals (Eastleigh, Winchester and Portsmouth), and hopefully answer the three questions above. I don’t bite, I don’t do hard sell, I will just give you my honest and straight-talking opinion. I look forward to hearing from you.

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

Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.

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

Friday, 12 April 2019

Home Ownership among Southampton young people has nearly halved in 20 years



The proportion of 25 to 34-year olds who own their home in Southampton has nearly halved in the last 20 years, so what does this mean for all the existing Southampton landlords and homeowners together with all those youngsters considering buying their first home?

Well, looking at the numbers in greater detail, in Southampton there has been a 43.5% proportional drop in the number of 25 to 34-year olds owning their own home between 1999 and 2019 .. and a corresponding, yet smaller drop of 21.2% of 35 to 44-year olds owning their own home over the same time frame.

So, if you were born in the late 1980’s or early 1990’s, the dream of owning a home in Southampton has reduced dramatically over the past 20 years as young adults’ wages and salaries are now much lower in relation to Southampton house prices. Nationally, average property values have grown by 186.9%, whilst average incomes have only risen by 44.8%, yet that doesn’t allow for inflation. However, whilst not over the same 20 years (it’s close enough though), the Institute of Fiscal Studies said recently the average British home was just over 2.5 times higher in 2015/6 than in 1995/6 after allowing for inflation; yet the average household income (after tax) of 25 to 34-year olds grew by only 22% in ‘real-terms’ over those 20 years.

Yet, even though property prices are at record highs, on the other side of the coin, the monthly cost of mortgage payments has actually fallen because interest rates have remained low. In 1999, the average mortgage rate paid by UK homeowners was 6.54% whilst today it’s more than halved to 2.64% - a drop of 59.4%. Many of you reading this will remember the 15% mortgage rates of 1992!

The fact is, mortgage repayments take up a considerably smaller proportion of take home pay, on average, than they did before the Credit Crunch or in the late 1980’s. Although the risk that mortgage rates will increase if the Bank of England put up interest rates might leave some homeowners in a difficult position – hence I might suggest (if you haven’t already) you seriously consider fixing your mortgage rate (remember to take advice from a professional before you do).

Yet look at the data in even greater detail and you will see, going back
to the 1960’s, we weren’t always the huge homeowning nation we always thought we were.

Today, 4.5% less 35 to 44-year olds and 33.5% more 45 to 54-year olds own their own home compared to 1969. So as the younger generation in Southampton has seen homeownership drop in the medium term, they will in fact end up inheriting the homes of their parents. We are turning into a more European (especially German) model of homeownership, where people buy their first home in their 50’s instead of their 20’s.

My message to first time buyers of Southampton is go and get some mortgage advice!  The cost of renting smaller starter homes is between 20% and 25% more than the mortgage payments would be. 95% mortgages (meaning a 5% deposit is required) have been available since late 2009 and some banks even do 100% mortgages (i.e. no deposit) .. I suggest that you don’t assume you can’t get a mortgage – for the sake of a 45 minute chat with a mortgage adviser – you get a straight answer and all the information you need.

Therefore, what does this mean for homeowners and landlords of Southampton? Well, for many tenants, renting is a positive choice and as we aren’t building enough homes to meet current demand, let alone eating into the lack of building over the last 35 years, demand will outstrip supply, home values will, over the medium to long term, rise above inflation – meaning it will be a good overall investment as demand for rental properties increases. Good news for Southampton landlords and Southampton homeowners alike.


The single biggest issue in the Country (and Southampton) today is that we aren’t building enough homes. I know it seems the local area is covered with building sites – yet looking at the actual numbers – we still aren’t building enough homes to live in. Residential property only takes up 1.2% of all the land in the Country – and whilst I’m not suggesting we build housing estates on National Trust land or cut down forests, until we realize that we aren’t building enough .. this issue will only continue to get worse.


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

Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.

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


Friday, 5 April 2019

Southampton Property Market vs London Property Market



Anyone would think that national news, especially when it comes to talking about the property market, is just focused on London centric. In fact, over the last 5 years, the London property market has really manipulated the UK on averages to such an extent that many lenders like the Halifax and Nationwide publish two indices, a national one without London and one with.

Now it’s true the London property market has undergone some quite acute property price falls. In the upmarket areas of Mayfair and Kensington, the Land Registry have reported values are 11.3% lower than a year ago, yet in the UK as a whole they are 1.3% higher. Yet look around the different areas and regions of the UK and Northern Ireland, property values are up 5.8% year on year, whilst over the same time frame, the East Midlands is 3.9% up and Yorkshire is 3.7% up. So, what exactly is happening locally in Southampton and what should Southampton landlords and homeowners really be concerned about?

Well, to start with, as I have been saying for a while now, property is a long game, and making decisions on the short-term fluctuations is something that could cause a nervous breakdown.

I wanted to look at how Southampton had performed over the long term, when compared to London and the UK as a whole.  Yet it is hard to compare differing locations when the average value of a property in Southampton differs greatly to one in the capital.  I decided if I wanted to compare like for like, I needed to see what would happen if I had spent £100 on property in London in 1979 and what would that £100 be worth today, and then do the same exercise for the UK. So, looking over the last 40 years …



See how the growth of that £100 was broadly similar between 1979 and 2007 on all three strands of the graph and then we had the credit crunch drop between late 2007 and 2009? However, after 2009 London went on a different trajectory to the rest of the UK. Whilst Southampton (and the UK) were generally subdued between 2009 and 2012, London kicked on. All areas of the country had a temporary blip in 2012, yet whilst Southampton and the UK went up a gear again 2013, London went into overdrive and up like a rocket!

Now you can see London has dipped slightly in the last year, so the hot question for everyone has to be - are price falls likely to spread (as they did in the previous property recessions of 1989 and 2007) to Southampton and other places in the UK? The Bank of England’s opinion is that a London house price drop is unlikely to be the beginning of a countrywide trend. Looking at the graph again, it can be seen London has been in decline for 2 years, whilst the rest of the country has been moving forward.

So, what does all this mean for Southampton
homeowners and landlords?

Well what happens in London does have an impact, but there are other issues that will have a bigger impact on the local property market. The simple fact is over the last 40 years, we have had 392.9% inflation, yet looking at a typical Southampton terraced house...

A Southampton terraced house has jumped in
value from an average of £22,314 to £240,100
since 1979 - a rise of 1062.2%

Property has in the long term been a good bet. Yes, we might have some short-term blips and as long as you play the long game - you will always win. In the short term, my concern isn’t over monthly up or down property values, Brexit or another General Election. With property values still rising faster than salaries in many parts of the country, what really matters is how much of householder’s take home pay goes into housing costs as opposed to other spending items. If housing gets too expensive - other things will suffer, like holidays and the nice things in life to spend your money on. Only time will tell!


P.S. Wonder what that Southampton terraced would be worth if it had gone by London house prices? Here’s your answer - £349,439.

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

Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.

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


Friday, 22 March 2019

As 43.8% of Southampton Property on the Market is Sold Are there any bargains because of Brexit?


Bargains – well yes and no – and let me explain why. To find a bargain you need to know the ‘market’, yet there is not one ‘property market’ in the UK. In fact, the British property market is like a fly’s eye, it looks like one whole but in fact it is split into lots of fragmented pieces and the same goes for the Southampton property market as that too is split into different patches… in fact it can even come down to two streets adjacent to each other, one street selling like hot cakes for top dollar whilst the next street can stick and at comparatively lower prices (i.e. if there is a school catchment boundary or differing postcode).

According to Coutts, property values in ‘Prime London’ have dropped by 14.7% in the last 5 years … yet look closely at those stats and Prime London is considered anything within a 1,500m radius of Kensington High Street above £4.6m – a totally different world to the average property in Southampton, which is worth just under £295,000 and has risen in value over those same 5 years by 27.0%  .. a different world!

I have noticed that the top end of the market above £600,000 in Southampton and the surrounding areas is proving a little tougher to shift than a few years ago, yet this can’t all be blamed on Brexit, as buyers have long been flinching at overestimated asking prices and excessive stamp duty rates.

In Southampton, 35.3% of properties for sale have
reduced their asking price in the last 3 months by
an average of 5.0%

A lot less than the reductions that are being seen in central London. In fact, the property market in Southampton is looking reasonably good with

43.8% of properties on the market in Southampton being
shown as under offer and Sold subject to contract

…Interesting when compared with the aforementioned London Prime market where only 5.86% of the properties for sale are sold .. some bargains to be had there!



So, where are the bargains in Southampton? Well, to start with, it’s all about knowing the local Southampton market. It’s all about comparing and contrasting property, so to start with, check out the property web-portals such as Zoopla and Rightmove to see what’s for sale. The art here is to click on the ‘include Sold stc’ in the filters .. then arrange them in price order. Then you will get a feel for what properties are roughly selling for. Also look at recent sales, so in Rightmove click on ‘House Prices’ on the main menu, on the proceeding drop down menu click on ‘Find Sold House prices’ and now you can type in a street, or even a street plus 0.25miles/0.5miles .. click on ‘List View’ and they are in date order. There is a similar function in Zoopla (feel free to contact me if you need a hand with that).

Then once you have found what you think is a bargain .. view it. Ask the agent why the sellers are moving.  By doing your research on the seller, seeing how long it has been on the market, whether they have reduced the asking price (if you ask an agent they have to tell you and by how much)  — you could cut a better deal if they are compelled to sell. Push home your advantage i.e. if you are a first-time buyer, don’t have a property to sell, chain free or cash purchaser it can all make a difference.

Looking at the numbers above, some savvy Southampton landlords and home buyers are taking advantage of the doom and gloom newspaper headlines as property owners’ expectations are probably at the lowest they have ever been since the Credit Crunch, especially if they are in the ‘got to sell’ category instead of the ‘would like to sell’ category.

Like anything in life .. buying a property bargain comes down to putting the hard-work in, doing your homework and jumping at opportunities.

If you would like such advice, speak with your current agent or alternatively – whether you are a landlord of ours or not – without any cost or commitment, feel free to drop me a line and drop in for a coffee and a chat.
If you are looking for an agent that is well establishedprofessional andcommunicative, then contact us to find out how we can get the best out of your investment property.

Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.

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