Ah the 2010’s, the tens, the teens - I am not sure what we
are supposed to call the decade that has just gone. No matter what it was
called, the last decade was a tough one, so does it really matter that
we never really got around to giving it a name? Some might say, whatever
one calls it, coming to an end is the most fundamental job any teen (and I
refer to all humans) could possibly do!
The last two decades have certainly been tumultuous. At
least for this decade we have just started we can say, in a few decades time,
things like “That style is so ’20s” and fellow humans will essentially know
what you are talking about. If you come of age in this decade, you will be a
’20s child and we will discuss ’20s politics and ’20s
style and all the things that hadn’t been created on the 31st December 2019;
the time that two nameless decades ended and how finally there was something
everyone in the UK could agree on: the name of the decade. Hey - it’s a start!
So, what has happened to the local Southampton property
market in the last nameless decade?
The average Southampton property has risen in
value from £209,900 to £290,900 in the last 10 years
… meaning each Southampton homeowner has seen a profit of £155.77
per week for those last ten years. Rolling the clock back to the start of the
last decade January 2010, and the economy (and housing market) were recovering
from the Credit Crunch and the worldwide financial crisis. A decade on and things
feel a little different. If you bought a Southampton home over the past 10
years, things have certainly changed.
Southampton property values rose 38.6% on
average over the last decade
yet taking inflation into account, they only rose in real terms
by 5.5 per cent.
Compare that to a 42.5% rise in the ‘80s, a 13.2% drop in
the ‘90s and rise of 62.8% in the 2000s in real terms. So, in
real terms after inflation, there has been essentially hardly any house price
growth in Southampton in the past decade.
On average, 1.12 million homes were sold each year last
decade, although that was 26.4% less than the decade before (the noughties) when
an average of 1.52 million properties were sold annually.
So, what are the underlying issues in the Southampton (and
wider UK) property market when, in real terms, property isn’t that much more
expensive than a decade ago? Whilst the
newspapers tell us first time buyers can’t get on the housing ladder and the housing
market is in gridlock - what is the problem? Well I am a firm believer in the
adage ‘bad news sells newspapers’ because the truth is something completely
different as 32.7% of homes last year were bought by first time buyers compared
with only 22.8% in 2009.
Yet, there are still issues; mainly a persistent lack of not
building enough new homes which curtails the supply and choice of property; but
stagnated wages, stiffer mortgage rules and homeowners not moving as much as
previous generations are all contributing to the problem. In the UK, the number
of homeowners who moved in 2019 was around 14% higher than in 2009, yet this
was still just under 50% lower than the average for the noughties. It’s all up
and down like a rollercoaster!
My thoughts for the future are based primarily on what will
happen to interest rates. Throughout the last decade, the Bank of England base
rate was 0.5% at the start and was cut to 0.25% in the Summer of 2016. Even
with the increase to its current level of 0.75% in the Summer of 2019, it has
made borrowing money on a mortgage very cheap indeed. Nonetheless,
bank/mortgage rates will rise again and I am concerned about the effect upon
the housing market. Now it won’t be as bad as previous times when mortgage
rates went up in the 1970’s and 1980’s (with mass repossession) because the tougher
mortgage rules introduced in April 2014 will have ensured borrowers were stress
tested on their affordability if interest rates shot up. Most borrowers have been stress tested on their
affordability to mortgage rates of up to 6% - 6.5%, which would obviously squeeze
household disposable incomes yet stop people losing their homes due to
repossession. Whilst I am not giving advice, just personal opinion, if you are
one of the 29.3% of homeowners who isn’t on a fixed rate – maybe you should
seriously consider doing so?
The 2020’s will be an interesting decade – and if you want
to be kept up to date with what is happening in the Southampton (and wider UK)
housing market – follow me and this blog to read similar articles to this one.
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.
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Email me on brian.linehan@belvoir.co.uk or call on 023 8001 8222.
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