Southampton Property Insights: Ignoring the Doom Monger Headlines

 

Navigating the property landscape, particularly in a city like Southampton, requires more than just a reactive approach to the daily newspaper and social media headlines.

As homeowners and potential investors are continuously bombarded with alarming whispers of plummeting house prices, coupled with rising interest rates and the heartache of negative equity, there's a tangible atmosphere of anxiety and trepidation. Yet, the truth we must all embrace is this:

 

No one can predict the property market with pinpoint accuracy, not even the experts.

 

Every press release from the Halifax, Nationwide or Land Registry with the merest hint of a downturn or hiccup in the property market becomes headline fodder, often stoking fears and uncertainty. Why do the newspapers and clickbait doom mongers post that? 

Because ‘bad news’ sells newspapers!

With interest rates on an upward trajectory, both prospective and current Southampton homeowners are grappling with pressing questions …

Will the house price decline continue? Is negative equity on the horizon? What of interest rates? Let us dive in on the current state of play.

 

Southampton house prices are only 3.0% lower than their peak of January 2023.

 

(£253,778 January 2023 to £246,052 June 2023 – the most up-to-date data from the Land Registry).

Interesting when compared with a national drop of 1.9% over the same time frame, with most areas seeing house prices rise in the last two months!

Historically, property prices have exhibited a rhythmic dance of peaks and troughs. A review of housing market trends over decades would reveal this inherent cyclical nature. House price declines are only a prelude to eventual rebounds. This pattern has been the underpinning of the property market for generations.

What of negative equity?

If Southampton house prices drop by 10%, a small percentage of homeowners (2.83% of all homeowners that have bought in the last two years) will be in negative equity. 

Yet, that is only a problem if they decide to sell the property, and as we all know, homeownership is a long-term thing, and most of those who would have negative equity will probably be on five-year fixed low-rate mortgages.

 

But what if Southampton house prices dropped from the peak in January 2023 by the same percentage (20.2%) as they did in the global financial crash in 2008/9?

 

If that were the case, Southampton house prices would just return to the Land Registry house price levels achieved in July 2019 (£205,468) – and nobody was complaining about those! (Although the number of people in negative equity would increase slightly).

As Southampton homeowners face uncertainty regarding potential house price drops, it is crucial to recognise the various factors that support the housing market’s resilience. While economic conditions can fluctuate, history has shown that housing values tend to appreciate over the long term. 

Southampton homeowners can also take comfort in the differences between the 2023 market and the 2008 housing bubble, including stronger equity positions and a more regulated lending environment. 

 

So what does the future hold for Southampton homeowners?

 

For homeowners in Southampton, it's crucial to understand the broader context. Global economic dynamics, national policies, regional developments, and local demand-supply dynamics all play pivotal roles in determining property prices.

As such, while short-term market shifts are inevitable, they don't necessarily define the long-term trajectory of property values.

 

Moreover, property should often be viewed as a long-term investment.

 

While the temptation to make quick decisions based on current trends is strong, it's vital to consider the bigger picture. Remember that property isn't just an asset; for many, it's a home, a place of memories, and a cornerstone of family life.

The mortgage interest rates of 1% to 1.5%, that we saw up to 18 months ago, are not going to return. Yet looking at 5-year swap rates, the money markets are predicting (with billions and billions of pounds of their own money at stake) that UK interest rates will come down significantly over the next 5 years from their current levels of around early 6%.

 

There is a saying in property -

“Marry the house, and date the interest rate”.

It simply means you are committing to a long-term relationship with the house you love. Yet you can dump the interest rate when you re-mortgage. The idea is that when you find the house you love, you buy it, with the anticipation that you will be able to refinance later when interest rates drop.

Diving into the archives of property history, one witnesses a tale as old as time: a fluctuating market characterised by peaks and troughs. Like the ever-rolling waves of the sea, property prices rise, fall, and rise again.

Such is the cyclical nature of housing markets worldwide, and Southampton is no exception.

For the residents and homeowners of Southampton, understanding the broader tapestry of property dynamics is paramount. Consider these vital elements:

·       Global and Local Economic Factors: Southampton's property market, though unique, doesn't exist in a vacuum. International economic shifts, national fiscal policies, regional developments, and even local events play decisive roles in shaping property prices. A short-term dip, as mentioned above, does not foretell a long-term decline or house prices crashes as seen in 2008.

·       The Long Game: Traditionally, owning property is a marathon, not a sprint. Quick, impulsive decisions, driven by panic or greed, rarely bear fruit. Instead, a more measured, patient approach, considering the property's long-term potential, is often more rewarding.

·       Southampton's Rich Tapestry: With its historical charm, coupled with an array of property types ranging from vintage homes to contemporary modern brand-new homes, Southampton offers resilience against sweeping market downturns. This diversity provides both stability and opportunity.

·       Infrastructure & Growth: Southampton's ongoing development and infrastructural projects often lead to a long-term appreciation of property values, countering short-term market fluctuations.

·       Rental Prospects: A potential silver lining during market downturns is the rental market. Southampton's strategic location, history, and vibrant community make it a perennial attraction for renters. For Southampton homeowners, this can translate to a steady income stream even if the sales market looks less favourable.

·       Historic Resilience: A glance at Southampton's past reveals a property market that has not only weathered numerous economic challenges but often emerged stronger and more robust. This resilience speaks volumes about its inherent potential.

In weaving through the property labyrinth, homeowners and investors in Southampton must cultivate a panoramic view. While it's easy to get swayed by the market's immediate waves, one must remember the vast seas and ocean beyond. The short-lived troughs are merely precursors to the next crest.

To truly succeed in Southampton's property domain, it's less about reacting to today's noise and more about tuning into the timeless melodies of history, patience, and informed foresight.

If would like a chat about where you sit in the Southampton property market, do not hesitate to give me a call or drop me a message on social media.

 

The Changing Landscape of Southampton’s Housing Market: Exploring the Ethical Dimensions of Buy-to-Let Investment.

 

The city of Southampton has witnessed a profound transformation in its housing landscape over the last few years, and the surge in private renting has led to significant debates about the morality of the buy-to-let market.

 

Let us look at the current statistics compared to 40 years ago to show the seismic shift. Looking at our local authority area of Southampton Council.

 

29,860 Southampton Households are in the Private Rented sector now, representing 29.19% of all homes in our local authority area.

 

Interesting when we compare this to the 1981 numbers for Southampton.

 

In 1981, 9,886 Southampton Households were in the Private Rented Sector, representing 13.13% of all homes in the local authority area.

 

This has started prompting discussions about the role of the Baby Boomer Generation in exacerbating the housing crisis and the ethical implications of the buy-to-let phenomenon.

This article delves into the factors contributing to Southampton's housing challenges, examines the generational economic imbalance, explores the history of housing policy, dissects the impact of financial deregulation, and evaluates the moral questions surrounding the buy-to-let market.

 

Generational Imbalance and Economic Disparities

The housing crisis in Southampton has ignited a debate over whether the Baby Boomer Generation, aged between 59 to 76, bears responsibility for the present situation. Born after World War II, this generation experienced unparalleled economic growth and prosperity during the 1970s and 1980s, benefiting from improved education, government subsidies, rising property prices, and technological advancements. However, critics argue that the success of Baby Boomers has contributed to a generational economic imbalance, leaving their children struggling with soaring rents and burdensome mortgages.

 

A Glimpse into the Past of the Southampton Property Market

To comprehend Southampton's current housing challenges, one must trace the key events that shaped its housing market. The mass construction of council housing during the 1950s and 60s, followed by the selloff of many council houses in the 1980s under Margaret Thatcher's Government, is blamed by many for their role in altering the market dynamics.

 

To give you an idea of the number involved …

 

22,397 Southampton Households are now in the Social Housing sector (Council Houses & Housing Association), representing 21.90% of all homes in our local authority area.

Interesting when we compare this to the 1981 numbers for Southampton.

 

In 1981, 24,551 Southampton Households were in the Social Housing sector, representing 32.61% of all homes in our local authority area.

As you can see, the numbers are not seismically different, are they? So, what are the other issues that caused this?

The early 1990s witnessed skyrocketing interest rates (15% at one point), leading to widespread repossessions in Southampton (and the UK as a whole). This was one of the catalysts that contributed to the underlying housing crisis of today.

 

Financial Deregulation and Buy-to-Let Investments

Another catalyst was risky lending practices in the UK and USA. In the early 2000s, UK Banks started introducing 100% mortgages and even riskier lending practices, with Northern Rock lending 125% mortgages (and we know what happened to them).

All this lending was built on the back of ‘derivative swaps’ between all the world's banks (they would sell the debts (i.e. mortgages) between each other to make money).

The problem was that many of these derivatives contained lots of safe, low-risk low-profit mortgages and some high-risk profitable ‘sub-prime’ USA mortgages. This had been caused by a change in the law in the USA in the mid-1990s with the easing of lending rules in the US through the Community Reinvestment Act in 1995, which allowed for sub-prime lending.

So, when the money markets started getting cold feet in 2007 because the banks didn’t know if their derivatives had a small or large number of high-risk sub-prime mortgages, the banks stopped lending to each other (because they were worried they wouldn’t be paid back as many of these sub-prime mortgages were defaulting in 2006/7 and being repossessed). 

This had a ripple effect on the UK's housing market. The UK banks had much smaller funds to lend out (because they could borrow money from the money markets for the reasons above), so they stopped lending to high-risk UK borrowers (i.e. 95% first-time buyers), whilst at the same time they increased lending to lower-risk landlords with buy-to-let mortgages with a 25% deposit and a stable income.

 

Millennials and the Buy-to-Let Controversy

The millennial generation, born between the mid-1980s and late 1990s, has been particularly affected by the surge in buy-to-let investments. These young adults, shaped by the digital revolution, need help entering the property market due to competition with buy-to-let landlords. Critics often portray Southampton landlords as greedy individuals capitalising on the housing crisis, exacerbating the sense of social despair among millennials. However, as I wrote in the Southampton property blog a few weeks ago, 64% of Southampton landlords are not increasing their rents. (If you want to read that article – drop me a message request).

 

Role of Property Developers and Housing Shortage

In response to the growing housing demand, property investors have stepped up, acquiring dilapidated properties and repurposing them into habitable homes. This has provided a partial solution to the shortage of available housing, particularly for those who rely on rental properties provided by landlords and property developers.

 

Ethical Dimensions of Buy-to-Let Investments

The ethical considerations surrounding the Southampton buy-to-let market are complex and multifaceted. On the one hand, Southampton buy-to-let landlords have filled a void in the Southampton housing market, providing much-needed shelter to many Southampton tenants. On the other hand, concerns arise regarding exploitative practices by a handful of rogue landlords and the potential commodification of a basic human need – shelter.

The bottom line is, as the population of Southampton grows, there needs to be more properties being built for everyone to have a decent roof over their head. The rogue landlords of Southampton need to be put out of business. Finally, Southampton tenants should expect a more regulated rental market (which they have achieved over the last few years), with greater security for tenants, where they can rely on good decent Southampton landlords providing high standards for their safe and modernised home.

 

Addressing the Crisis and Moving Forward

To alleviate Southampton's housing crisis, a multifaceted approach is necessary. Fairer regulations for Southampton landlords, enhanced tenant protections, and incentivising property development could contribute to a more balanced housing market. Exploring innovative models from European countries, where renting is more prevalent, could provide insights into creating a system that ensures decent and affordable housing.

Final Thoughts

Southampton's housing market has undergone substantial changes over the years, with the rise of private renting and the proliferation of buy-to-let investments playing a pivotal role. The generational economic imbalance and ethical concerns associated with the Southampton buy-to-let market have sparked passionate debates about the responsibility of different generations and the moral implications of housing as an investment.

As Southampton continues to grapple with housing challenges, collaborative efforts between policymakers in local and central Government, developers, Southampton landlords, and tenants are essential to creating a housing landscape that is fair, ethical, and accessible to all.

So, my final question is to you, the reader of this article.

Only you can decide if buy-to-let is immoral, but let me ask this question first.

 

If these Southampton buy-to-let landlords had not taken up the slack and provided 19,974 extra homes in the last 40 years for people in the Southampton Council area, where would these Southampton tenants be living now?

 

During the height of council house building in the 1950s, UK local authorities were building, on average, around 147,000 council houses a year. In the last decade, UK local authorities have only averaged building around 1,400 council homes a year.

 

It would cost Southampton Council £2.54bn to build all those 19,974 buy-to-let homes today that local landlords have funded themselves (a figure that assumes the council build on land they own).

 

That building sum would take up 100% of our local authority's budget for the next eight to ten years.

 

All this conjures up many questions such as:

 

• ·         Is the buy-to-let practice immoral or in fact necessary?

 

• ·         Should, as recently voiced, landlords be restricted to one rental property each?

 

• ·         What would our housing landscape be like without rented accommodation?

 

·         Of the 29,860 Southampton households that are in private rented accommodation, how many of those have little or no option other than to rent, so where would they be if there was no private rented sector?

These are my thoughts; tell me yours!

 

The Emergence of Accidental Southampton Landlords in a Slowing Housing Market?

 

A Southampton landlord remarked to me the other day that he felt that there were more 'posher' up-market properties coming up for rent in the last six months compared to a couple of years ago.

I stated that this was the case, and it wasn't all down to the recent rental growth – it was the growth of the upmarket 'accidental landlord'.

With the Southampton housing market showing signs of a slowdown and predictions of further house price declines, I am starting to see the return of the ‘accidental landlord’, but in a somewhat different form to what they were in 2008/9.

An ‘accidental landlord’ becomes a landlord unexpectedly or unintentionally. This often occurs when homeowners rent out their property instead of selling it due to a slowing housing market, a change in personal circumstances, or other unforeseen reasons.

While the sales market in Southampton has experienced a period of strength in recent years, activity has started to slow down from the levels seen in 2021/2. In contrast, there has been soaring demand for Southampton rental properties.

To give you an idea of the growth of rents.

 

The average rent for homes coming on the market in the Southampton area in 2021 was £919 per month, whilst in 2023, it has been £1,128 per month.

 

Some Southampton homeowners, fearing not achieving their desired selling price, might opt to retain ownership of their properties and instead rent them out until market conditions improve.

 

Back in 2008/9, this trend was particularly evident in the middle market segment.

 

However, in 2023, many property commentators are suggesting if ‘accidental landlords’ do start to emerge, it will be in the upper quartile property segment (i.e., the top 25% of properties by value), where many homeowners bought in the post Lockdown race for space of 2021/2. 

Looking at the figures, they could be correct.

The upper quartile rental market (excluding student lets) starts in just over the £1,500 per month range in Southampton.

·        In the first seven months of 2021 (Jan to Jul) in the Southampton area – an average of 49 properties a month came onto the market for rent at £1,500 per month or more.

·        In the first seven months of 2022 (Jan to Jul) in the Southampton area - an average of 66 properties a month came onto the market for rent at £1,500 per month or more.

·        In the first seven months of 2023 (Jan to Jul) in the Southampton area - an average of 79 properties a month came onto the market for rent at £1,500 per month or more.

(Southampton area being SO14 to SO19).

 

Many of these could afford to be patient in pursuit of optimal selling conditions. The rise of ‘accidental landlords’ can be attributed to various factors, such as limited property appreciation, increasing mortgage costs, and robust demand for Southampton rentals, making renting out properties an attractive alternative.

 

‘Accidental landlords’ are also created through other diverse circumstances.

 

Irrespective of what is happening in the economy and Southampton property market, births, deaths and marriages continue. There will always be some new couples who decide to rent out one of their properties after moving into a shared home, while others inherit properties through the passing of parents or grandparents.

The current average tenancy length of 51 months provides these new Southampton landlords with just over four years to allow Southampton property values to recover before re-evaluating the market. However, stepping into the role of an accidental landlord carries specific implications that homeowners need to be mindful of.

 

Understanding the tax implications is a crucial aspect that ‘accidental landlords’ should grasp.

 

Transitioning to landlord status may result in the loss of specific tax benefits, including stamp duty relief, and necessitate payment of income tax on rent. Furthermore, upon selling the Southampton rental property, landlords may become liable for capital gains tax on the profit made from the sale, as it is no longer considered their primary residence and I implore you to take advice from an accountant.

To mitigate the impact of tax changes, some Southampton landlords have chosen to incorporate their properties into Limited Companies. Corporate structures offer potential tax relief on mortgage costs and the opportunity to pay lower Corporation Tax rates than individual income tax rates. However, incorporating properties involves additional expenses, such as stamp duty and capital gains tax on existing properties transferred to the company.

Individual landlords with only one property may find incorporation less advantageous, but it could be a viable option for those planning to expand their buy-to-let portfolios.

 

Investing in property maintenance is a crucial consideration for Southampton's 'accidental landlords'.

 

Well-maintained properties are more likely to retain or increase their value over time. Retrofitting properties to improve energy performance can also benefit tenants and future buyers, helping reduce utility costs and enhance overall comfort.

Accidental landlords must diligently handle this critical area: appropriately protecting tenants' deposits. Please safeguard deposits adequately to avoid significant compensation claims, with landlords potentially losing up to three times the deposit amount. To protect against such risks, landlords must ensure compliance with deposit protection schemes and provide tenants with essential documents, including Energy Performance Certificates, the Government's "How to Rent" guide, and current gas safety certificates.

 

Misunderstandings can inadvertently arise to renting direct to family or friends, leading to legal disputes.

 

Even though you know the tenant, it still could be wise to employ the services of a letting agent to establish clear terms in writing at the outset of a tenancy to avoid potential conflicts and protect the rights of both landlords and tenants. This becomes particularly relevant as the Renters Reform Bill, set to introduce significant changes to the private rental sector, including tenancy length and the process of regaining possession, is awaiting approval.

My overriding message to every Southampton ‘accidental landlord’ is that they must be aware of the tax implications, consider incorporation a potential strategy, invest in property maintenance, protect tenants' deposits, and establish clear terms to avoid disputes. Additionally, there are over 170 pieces of regulations regarding renting your property out. Also, it's essential to stay informed about forthcoming changes in renters' rights introduced by the Renters Reform Bill.

In conclusion, with the Southampton housing market experiencing a slowdown, I suspect an increasing number of Southampton homeowners are considering becoming ‘accidental landlords’ by opting to rent out their properties instead of selling.

 

You must weigh the risks of renting your Southampton home and the potential rewards.

 

I know of many stories of Southampton homeowners who waited five or six years after the Credit Crunch to hit their ‘target price’ for their existing home, only to realise it cost them tens of thousands of pounds in costs and the price they had to pay for their new home. On the other side of the coin, I know plenty of ‘accidental landlords’ in Southampton who used the fact that they became an ‘accidental landlord’ as an opportunity to build an impressive rental portfolio over the last 15 years.

If you are uncertain or do not possess all the facts, don't hesitate to contact me to discuss your plans. Then I can give you appropriate level-headed advice to make the right decision. By taking proactive steps and understanding the risk and rewards of being an ‘accidental landlord’ in Southampton, you can navigate the Southampton property market successfully, even during uncertain times in the housing market.

 

The Untold Story of Southampton’s Terraced Houses

 

Call me old-fashioned and nostalgic, but I am fond of terraced houses.

I've conducted some research that my fellow readers of the Southampton Property Market Blog will find intriguing!

Architecturally speaking, the terraced or townhouse has been prevalent in the UK since the late 1600s. It involves a row of symmetrical houses that share side walls.

The credit for the first terraced houses goes to Monsieur Barbon, a Frenchman who constructed them around St. Paul's Cathedral during the rebuilding phase after the Great Fire of London in 1666.

Interestingly, the French invented the terraced house concept around 1610-15 in the Le Marais district of Paris, featuring planned squares and properties with identical facades. However, it was during the 1730s that terraced houses truly flourished in London and, of course, in Bath with the magnificent Royal Crescent.

Let's focus on Southampton.

 

Many of our terraced houses in Southampton were built during the Victorian era.

 

Terraced houses emerged as a response to the Industrial Revolution, as people flocked to towns and cities for employment.

Terraced houses provided decent, habitable accommodation, offering an escape from the slums.

Interestingly, most Southampton Victorian terraced houses followed a standard design: a ‘posh’ front room for high days and holidays, a back reception room where the family resided daily, and a scullery attached to it (scullery - a small kitchen at the rear of a house used for washing pots and other dirty household work). Off the scullery, there was a door leading to a rear yard where you would traditionally find the privy or outside toilet! There were two good sized bedrooms upstairs, with a smaller third bedroom (or nursery) accessed directly through the second.

Notably, in 1875, the Public Health Act mandated that each house should have 108 square feet of liveable space per main room, access to running water, an external toilet/privy and rear access for waste collection (as there were no public sewers in Southampton at that time, at least not where these "workers'" terraced houses were built).

During the 1960s and 70s, an indoor WC and a bathroom were installed (often in that third bedroom or as a ground-floor extension of the scullery). In the 1980s, gas central heating became prevalent, and since then, there has been a continuous replacement of uPVC double glazing.

Two-storey terraced houses started to be built again in the 1960s, yet they were marketed as 'townhouses’. Since the early 2000s, with the price of building land rising so quickly, new homes builders started to build three-storey townhouses.

 

The humble terraced/townhouse neverseems to go out of fashion!

 

Looking at the makeup of all the Southampton properties, some fascinating numbers appear.

Of the 102,293 households in Southampton …

 

13,291 are detached properties

26,344 are semi-detached properties

20,089 are terraced/townhouse properties

42,476 are apartments/flats

 

… the rest being made up of caravans and mobile homes.

 

Next, looking at the percentage compared to the national average is interesting.

 

13.0% are detached properties (national average 26.1%)

25.8% are semi-detached properties (national average 31.4%)

19.6% are terraced/townhouse properties (national average 22.5%)

41.6% are apartments/flats (national average 20.1%)

 

So how has the Southampton terraced house risen in price?

 

The average price for a Southampton terraced house in spring 1995 was £50,727. Today, that figure stands at £249,463, a rise of 392%.

 

Not bad when you consider the overall average in Southampton during the same time frame has only risen by 369%.

Terraced houses in Southampton often go unnoticed by buyers, despite offering flexible and sizeable accommodation. It's time to shed light on the untold story of these charming homes. If you're thinking of selling your terraced house and want to ensure you get the best price, look no further. As an experienced estate agent specialising in Southampton properties, I'm here to offer you expert advice tailored to your needs.

 

Remember to consider the potential of the terraced house.

 

These properties have a rich architectural history and have provided significantly more habitable accommodation for generations. From the standard Victorian design with its distinct rooms and rear yard to the modern-day improvements of indoor facilities and central heating, from the second coming of the terraced house in the last 50 years with the ‘townhouse’, Southampton's terraced houses have continually evolved to meet the needs of their residents.

Call me if you're ready to sell your terraced house and want to maximise its value.

As a local estate agent, I deeply understand the Southampton property market. With my expertise and personalised guidance, we can navigate the selling process together, ensuring you achieve the best possible outcome.

Contact me today to unlock the full potential of your Southampton terraced house and secure a successful sale!

14 Reasons Not to Fear Southampton House Price Drops

 

The Southampton property market experienced a boom between the summer of 2020 and late summer of 2022, fuelled mainly by pandemic-induced trends such as the stamp duty stimulus, low mortgage rates, the race for space, and the rise of remote working.

2023 has presented a different story for the Southampton housing market, with cooling demand, rising mortgage rates, and declining home sales from the previous two years.

Many Southampton homeowners are now concerned about a possible fall in Southampton home prices, as the newspapers predict a housing recession. Nonetheless, there are several reasons why homeowners should not fear Southampton house price drops.

This article will explore 14 key factors that can provide reassurance in uncertain times.

 

1.   Strength of the Southampton Job Market

The job market is crucial in determining home prices, directly impacting income levels. Fortunately, the Southampton job market remains robust, with unemployment hovering near all-time lows of just 3.6%. Labour shortages are currently a more significant concern than a lack of job opportunities. As long as the job market remains stable, Southampton home prices should be firm and prevent substantial house price falls.

 

1.      2023 is Different to 2008

Comparing the current Southampton housing market to the 2008 Credit Crunch reveals significant differences. The housing bubble that led to the crisis was primarily driven by subprime mortgages in the USA, resulting in a wave of defaults. This spread to the UK, and banks stopped lending to each other (and mortgage borrowers).

Today's Southampton property market differs significantly for four reasons.

Firstly, Southampton homeowners have built substantial equity in their properties since 2008. Secondly, many Southampton homeowners with a mortgage have taken advantage of re-mortgaging at lower fixed rates during the pandemic meaning they are immune to the recent hike in interest rates. Third, the banks are prepared to lend money, unlike 2008 when there was a severe lack of credit as banks weren’t prepared to lend money. Finally, the Bank of England in 2014 told lenders to stress test every mortgage application up to 6% or 6.5% mortgage rates. These four points have reduced the threat of widespread defaults, even if the UK economy were to enter a recession.

The Long Game of Southampton Homeownership

Most Southampton homeowners view their household as more than a house; it's a home. It’s more than just a financial asset; the home represents a lifestyle choice. Despite potential house price declines over the next few years, Southampton homeowners' long-term perspective should remain intact. Throughout British history, home prices have always appreciated over time, even after the financial crisis of 2008.

Southampton homeowners who held onto their properties during the Credit Crunch eventually saw Southampton house prices return to their pre–Credit Crunch 2007 peak by July 2014.

 

…and here is where playing the long game is so important in the Southampton property market.

 

Since July 2014, £78,181 has been added in additional equity to the average Southampton home.

 

It’s so easy to fixate on the short term and forget the medium to long terms gains made by property.

 

4.     Inflation is Good News for Southampton Homeowners and Landlords

While inflation may be a cause for concern in various aspects of daily life, it can benefit most homeowners (and landlords). Inflation often leads to increased house prices and reduces any mortgage's 'real' value, thus acting as a hedge against rising costs. Higher wages resulting from inflation will improve affordability, thereby supporting home prices. The key is avoiding inflation leading to a full-blown recession, which could negatively impact the housing market.

 

5.     Positive Implications for Going Upmarket

A national home price decline can be good news for homeowners looking to move up to a bigger or more expensive property. Such a decline would reduce the price gap between selling their home and purchasing the next one.

For example, if you were planning to move from a £300,000 Southampton home to a £500,000 Southampton home today, excluding moving expenses, it would cost you an additional £200,000 to move home. Let's say, for example, Southampton house prices dropped by 10%, the £300,000 house would be reduced to £270,000, and the £500,000 house would be reduced to £450,000, meaning the gap between the two would only be £180,000 – thus saving you money!

 

6.     Persistent Housing Shortage

The national housing shortage, which originated during the financial crisis when homebuilders scaled back construction, remains a significant factor in supporting home prices. Analysts estimate that the market needs to add around four million new homes to meet current demand fully. Given the cooling of the market and rising mortgage rates, homebuilders are still cautious about increasing construction. As long as the housing shortage persists (which it will without an additional 2 million homes being built), it should help sustain home prices.

 

7.     Southampton Rental Market Dynamics

Soaring rental prices, another consequence of inflation, are another reason for homeowners to be content with their current ownership status. Homeowners with fixed-rate mortgages enjoy the stability of locked-in monthly mortgage payments. In contrast, Southampton renters face challenges with rent increases of 10% or even 20% per annum on new properties coming onto the market (some types of properties) due to the ongoing lack of properties to rent. The rise in rental prices is encouraging more Southampton people to consider homeownership, maintaining demand and supporting property prices.

 

8.     Anticipated Mortgage Rate Reduction

While recent rate hikes from the Bank of England have affected the housing market, there is an expectation of easing in the near future. According to the money market's latest forecasts based on the 5-year swap rate, the Bank rate is projected to fall in early 2024. A decline in the Bank of England rate would lead to a decrease in mortgage rates. If the economy remains stable during that period, declining mortgage rates could support house price growth.

 

9.     Expected Moderate Decline

Economists generally predict that any potential home price decline will be modest. With the current support from the housing shortage, inflationary trends, and well-capitalised mortgage owners, a moderate single-digit decrease is more likely than a severe crash like 2008. Such a moderate decline should be less intimidating for Southampton homeowners.

 

1   Potential for Renovation Costs Dropping

The demand for home improvement during the pandemic led to a surge of 41.9% in construction materials in the two years after lockdown. However, in the last 12 months, overall building costs have fallen by 1% (despite inflation). Some notable drops include timber dropping 27.6% over the previous 12 months, although cement is up 13.7%. Price reductions in new construction might lead to even more easing of renovation costs. The trajectory of renovation costs will depend on the housing market and broader economic conditions.

 

1   The Property Market Loop of Recovery

If home prices were to fall, it would likely be driven by weakened homebuyer demand rather than an oversupply of homes. Such a decline would indicate an economic slowdown or recession, prompting the Bank of England to respond with interest rate cuts. Lower interest rates would subsequently reduce mortgage rates, giving homebuyers a boost in affordability and ultimately contributing to the market's recovery.

 

1   House Price Drops Only Affect You if You Sell

A decline in Southampton home prices might psychologically impact homeowners, even though it may not affect them directly if they do not plan to sell soon. House prices can only affect you if you are moving. 96.54% of homeowners will still be in their homes in 12 months, so they won't lose money if the property market dips. Price change only affects those looking to buy and sell. Don't be held hostage by market trends - know when to buy and (just as importantly) when to sit tight.

1   Actual Value of Homeownership

The pandemic has brought heightened attention to the value of homes, with widespread discussions on the housing market and price speculations. However, Southampton homeowners' connection to their homes goes beyond financial considerations. It is often rooted in the relationships shared with loved ones, the sense of community, the peace of mind derived from home ownership, and the efforts invested in the property. The true value of homeownership transcends mere monetary figures.

 

1   The Rarity of Prolonged Price Declines

Prolonged home price declines lasting five-plus years, especially those as severe as the early mid-1990s-era housing bust, are infrequent. Throughout the last century, national home prices have only declined occasionally and typically required unique combinations of events. While recent price surges have led to speculation about a potential decline, numerous market tailwinds and the reasons above should prevent a sharp plunge and potentially avert any significant house price crash.

 

But what if Southampton House Prices do Drop?

 

Ignoring the 14 points mentioned above, let us see what a price reduction would mean for Southampton homeowners.

The peak of the property market (just before the Credit Crunch hit) in our local authority area of City of Southampton was November 2007, when the average value of a property was £168,795.

The Southampton property market bottomed out in March 2009 when Southampton property prices dropped to £134,665 (a drop of 20.2%).

Today, the average property in Southampton and the local authority area stands at £246,976.

So, if Southampton house prices dropped by 10% (to £222,278), they would only return to the levels that were achieved in Southampton in August 2021 … and nobody was complaining about those!

Now, don't get me wrong, if house prices drop by 10%, a tiny percentage of homeowners (2.83% of all homeowners that have bought in the last two years) will be in negative equity.

However, that is only an issue if they decide to sell the property, and as we all know, homeownership is a long-term thing, and most of those who would have negative equity will probably be on five-year fixed-rate low-rate mortgages.

But what if Southampton house prices dropped by the same percentage (20.2% as mentioned above) as they did in the global financial crash in 2008? If that were the case, Southampton house prices would only return to the house price levels achieved in July 2016 (although the number of people in negative equity would increase slightly).

As Southampton homeowners face uncertainty regarding potential house price drops, it is crucial to recognise the various factors that support the housing market's resilience. While economic conditions can fluctuate, history has shown that housing values tend to appreciate over the long term.

Southampton homeowners can take comfort in the differences between the 2023 market and the 2008 housing bubble, including stronger equity positions and a more regulated lending environment.

As we navigate through market cycles, Southampton homeowners should remain focused on their long-term goals, the strength of the job market, and the true value that their homes bring beyond monetary considerations. By acknowledging these factors, Southampton homeowners can confidently approach potential price declines and adapt to the market.

These are my thoughts, what are yours?

Southampton Rents Smash Through the £1,120 Barrier .........Are Southampton Landlords Profiteering?

 

The private rented sector for both Southampton landlords and Southampton tenants is facing immense challenges, with a shortage of available homes for rent putting renters under significant pressure.

And you can see why when the average UK rent in 2021 was £1,381 and in 2023 it has been £1,706, an increase of 23.53%.

Let’s look closer to home in the Southampton area.

 

The average rent for homes coming on the market in the Southampton area in 2021 was £919 per month, whilst in 2023, it has been £1,128 per month.

(Southampton area SO14 to SO19).

You can see why people are accusing landlords of "widespread profiteering".

But as always, the devil is in the detail.

 

This increase in average Southampton rent is for new tenancies, not tenancy renewals.

 

A new tenancy is when a brand-new tenant moves into a home, whilst a renewal is when an existing tenant renews the lease with their existing landlord.

Government data shows that most landlords are not exploiting the mortgage crisis, with 64% of landlords maintaining and 4% decreasing rents to shield renters from the impact on renewal of their tenancy agreement, dispelling the notion that they are exploiting the situation.

Looking at the same Government data, of the landlords setting rents for new tenants, just under half of landlords (45%) stated they increased the rent compared to the previous tenancy with the old tenant, whereas a third (35%) kept the rent they charged at the same level, and surprisingly 1 in 12 (8%) decreased the rent.

 

Therefore, whilst the average percentage growth in Southampton for new tenancies is 22.7%, the overall average for all tenancies is only 4.6% for Southampton.

And 4.6% is much lower than the rate of inflation.

Contrary to popular belief, landlords' profit margins have significantly dwindled in recent years. The profits for private landlords are at their lowest since the Credit Crunch due to rising mortgage rates and limited tax relief. This demonstrates that private landlords are not profiteering during the cost-of-living crisis.

Now some of you will say, Southampton house prices have risen in that time. Yes, that is the case, yet not by the rate of inflation, so in fact in ‘real’ terms, their investments have gone down in value.

 

Landlords are often portrayed negatively in the media but are in fact making considerable efforts to provide safe and secure housing for millions of tenants.

 

Landlords face growing costs, including increased mortgage payments and the negative impact of a tax system that discourages investment in the rental market. These challenges are further exacerbated by ongoing uncertainty surrounding reforms to the law regarding landlords.

With limited options available, landlords must choose between leaving the private rented sector, increasing rents as a last resort, or absorbing mounting costs. However, the latter is nearly impossible for most individual landlords who lack deep pockets. To address these challenges, the Government must provide crucial support to the rental market.

To alleviate the burden on renters, the Government should reconsider current taxes which are designed to discourage landlords from providing more rental homes. It is vital to ensure that the supply of rental properties does not further diminish, as Southampton tenants simply cannot bear the consequences of a dwindling market and it will lead to further housing hardship.

 

Without proper government support, both renters and landlords will continue to face challenges, caught between a rock and a hard place.

Housing is such an important thing (rather like the NHS), and I would urge all parties, to move beyond rhetoric and take positive action to support the private rented sector.

 

I know many Southampton landlords who are making sincere efforts to shield Southampton renters from the mortgage crisis, and it is crucial their contributions are recognised.

 

By fostering an environment that encourages investment and providing support to renters, the Government can help alleviate the strain on both landlords and tenants and ensure a sustainable and fair rental market for all.

These are my thoughts, what are yours?

 

Why Does it Take 186 Days to Sell a Home in Southampton?

 

The average time to sell a house in the UK from start to finish is 170 days, equivalent to 24.3 weeks or 5.6 months from the first day of marketing to legal completion, whilst in Southampton it’s 186 days.

The actual time can vary depending on market conditions, location, property type, and pricing strategy, so in this article I delve deeper. Here is a breakdown of that 186 days.

 

Step 1 - Time to Accept an Offer:

On average, nationally, it takes 50 days (up from 43 days in 2022) to accept an offer on a property. This time starts with placing the property on the market, viewings, negotiating an offer and reaching an agreement with a potential buyer.

 

In Southampton, it is taking 47 days on average to agree a sale on a property.

 

Again, the type of Southampton property makes a huge difference as well.

The best-performing type of property is a Southampton semi-detached house, which takes an average of 41 days to agree a sale, to the poorest-performing type of property, which is a Southampton detached house, which take an average of 55 days.

 

Step 2 - Time from Offer Acceptance to Completion:

Once an offer is accepted, over the last 12 months, it has taken an average of 120 days nationally for the sale to be completed. This period involves finalising the legal and financial aspects of the sale to the legal exchange of contracts, with legal completion a week or a fortnight later.

 

In Southampton, it is currently taking on average 139 days from the sale agreed to the sale being completed.

It's important to note that these figures are based on averages and can vary depending on individual circumstances.

 

If you need to sell your Southampton house quickly, there are a few steps you can take to expedite the process.

 

There are many factors that can affect how long it takes to sell a house. The three major factors are:

a.      Your Asking Price: The price you ask in relation to similar Southampton properties on the market has the most significant impact. Overpricing can result in fewer viewers, meaning fewer buyers, while competitive pricing generates immediate interest. Look at properties that are similar to yours on the market at the moment. When searching the property portals, not only search for them in price order, search for them in how long they have been on the market. That will give you a fascinating insight into the current state of the property market for Southampton homes like yours.

b.      Buyers' Market, Balanced Market or Sellers' Market: The market condition, whether hot or cold, plays a significant role. In a hot market (sellers’ market), homes sell fast and pricing is not as sensitive, while in a cold market (buyers’ market), competitive pricing is crucial to avoid a prolonged time on the market with no chance of a sale.

c.      Quality of Solicitors: Agreeing a price/sale is only half the battle to getting you moved. Your solicitor's efficiency can impact your sale's progress. Choosing a responsive solicitor who cooperates with estate agents can help prevent delays. Again, we can suggest some excellent Southampton and regional solicitors that are experts in their field.

If you are considering a move in the next 6 to 12 months, now is the perfect time to start planning. Selling your Southampton home can be a complex process, but with the proper guidance, you can navigate it smoothly and efficiently. As experienced estate agents in Southampton, we understand the local market dynamics and have a track record of success.

Our team is well-versed in the factors that impact selling time, including the price asked and market conditions. We work with responsive solicitors who prioritise efficiency and collaboration regarding legal matters. Their cooperation with us as estate agents helps prevent delays, ensuring a smooth progression from offer acceptance to completion.

 

By pricing your property competitively, we attract immediate interest from potential buyers. Our knowledge of the local Southampton market enables us to navigate buyer and seller markets effectively.

 

If you want to sell your Southampton home, we offer a no-obligation free appraisal to discuss your selling timescales. Our personalised advice and guidance are tailored to your situation, giving you the information you need to make informed decisions. Together, we can make your move a reality.