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Thursday, 31 October 2019

The leasehold and ground rents scandal of Southampton




Freehold or Leasehold .. which is best? Well, when buying a property in the UK there are two main types of ownership – freehold and leasehold and, when boiled down, they mean the following...

Freehold: The person who owns the freehold of a property owns the property and the land it stands on.

Leasehold: As a leaseholder you do not own the land the property is built on. A leaseholder essentially rents the property from the freeholder for a number of years, decades or in some Victorian terraced houses, for centuries. 

All apartments have to be sold as leasehold properties because of the very nature that you have a neighbour above or below you (so both of you can’t own the land) with the length of the lease being over 100 years (even more sometimes).

However, with some apartments – particularly Victorian and Edwardian houses converted into numerous apartments – which are sold on the basis that the leasehold apartment owner also owns part of the freehold (with other leaseholders in the same building), having what is known as 'share of freehold'.  Similarly, the Government also brought in legislation a number of years ago for more modern apartment blocks built in the 20th century where it allowed leaseholders to club together and have the right to purchase the freehold together.

Now we must stress, there is nothing wrong with leasehold – it’s been a useful type of homeownership since Norman times, it’s just that with a leasehold comes a potential extra responsibility. If there are four apartments in a block, who pays for the leaking roof when all benefit from a watertight roof? Who pays for the bad foundations, when all benefit from good foundations? Who pays for building insurances? .. the list goes on – so clauses are added to the leasehold agreement to ensure everyone is protected and pays their fair share of the joint costs of the building with service charges and a nominal ground rent (ground rent is a nominal rent, commonly quite low, often in the region of £50 per year to the freeholder of the property).

Whilst houses tend to be sold as freehold as it's a more unambiguous set-up, given there is only one property on the land. Contentiously however, in the last 20 to 25 years this has not always been the case with new-builds as some new homes’ builders have sold the leasehold to the buyer and retained the freehold. There is nothing wrong with that, it’s just in some cases (not all) they also added some oppressive clauses to the lease of the property they were selling, which could be the next PPI scandal - albeit for property.

Government reports have emerged recently that suggest 12,000 leaseholders in the UK are facing ground rents – which they pay to the freeholder – that double in cost, usually every 10 years, but occasionally more frequently.
Builders started to add clauses into leasehold property sales with ground rent being set at £300 and £400 a year, yet it doubled every ten years. Though unwary first-time buyers were habitually told that their 500 and 999-year leases were practically freehold, the clauses inescapably meant that the ground rent would spiral to ridiculous levels meaning the average ground rent would be £23,750 a year by 2070 and £379,900 a year by 2130, making the properties practically unsellable today, with owners often left unable to re-mortgage too.

So, how many people are affected by this in our local area?

Well, using Government data, our research suggests that in Southampton 98 householders have bought a detached house, semi-detached house or town house (which would normally be freehold) as leasehold. Not all these have onerous lease clauses, yet some do. I know it doesn’t sound a lot, yet that is potentially 98 lives ruined with houses they can’t sell - making them prisoners in their own property.

 
The good news is the Government is on the case and serious about sorting this issue out as they have proposed a ban on the future sale of houses as leasehold, as well as cutting ground rents to zero. Yet stern questions remain about the future of homeowners in existing leaseholds. Westminster wants the builders to set up compensation plans, and we will say many (not all) have stepped up to the mark and started to sort this, although some campaigners have said the schemes are not fit for purpose, let’s hope they are wrong.



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, 25 October 2019

Are Southampton Builder’s Constructing the Wrong Type of Property?



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

The British housing market has never been so newsworthy. Every other day, there is an article in the newspaper or online about impending house price drops, house price rises, building on green belt, mortgage rates up/down, first time buyer affordability and the woes of being a buy to let landlord, to mention but a few. As a nation, we have a strong national desire to be homeowners.

The English Housing Survey stated the proportion of owner occupied households increased steadily from 52% in the early 1980s to 2003 when it reached its peak of 71%. Since then, owner occupation gradually declined to 63% in 2014, yet in fact increased to 64% in 2017 and has stayed there since.
One of the main motives of home ownership is the prospective tax-free capital appreciation that can be obtained. It’s no wonder the phrase ‘as safe as houses’ is popular in the English language, as many homeowners use homeownership as a nest egg or even a pension pot, as savings rates are at extraordinarily low levels.

Yet even with the news that homeownership is on the rise, the biggest seismic shift to the Southampton property market is the growth of the rental market, which has more than doubled in the last 15/20 years. So how can the social housing sector (Council Housing) remain roughly at the same level since the millennium, homeownership slightly grow, yet the private rental sector be so huge? Well it comes down to the fact that many more homes have been built in Southampton in the last 15/20 years, and a lot of them have been bought for buy to let, or Southampton homeowners with second hand starter homes have also sold them to buy to let landlords and they have bought larger brand new homes.

Yet the question we wanted to ask is ... are we building the right sort of homes, especially when it comes to the number of bedrooms? Whilst the data doesn’t exist for Southampton, the country’s stats are available and it makes fascinating reading...



Looking at the graph in 2008, 59% of new homes built were one and two beds, yet last year that had dropped to 35%.

The Housing Minster said recently he was concerned that new homebuilders were building the wrong types of homes in the wrong places at the wrong prices. Many (not all) tenants are tenants because they can’t afford the deposit and as there is a direct coloration between the rent’s landlords charge and tenant’s earnings (i.e. as earnings go up, rents go up and vice versa), and earnings for the last seven years have been subdued, the property tenants have been able to afford in Southampton are the smaller one and two bed properties. Yet a lot of these tenants are now having families (with the need for larger property with three, even four bedrooms).

Looking at the stats for Southampton, it can be seen the vast majority of homeowners live in the larger properties with more bedrooms, whilst private rental tenants are in the smaller properties (with less bedrooms).


Our concern is - will young families and professionals be able to afford to live and work in Southampton, especially as the local authorities are unable to build council housing (aka Social Housing)?

One symptom of all these issues mentioned above is the massive growth in multi-family households (i.e. households containing two or more families), which have increased by 42% in under a decade. Now of course many will be because of older couples moving in with their adult children yet many are unrelated families sharing a house, something that simply shouldn’t be happening in 2019.

If we don’t increase the supply of the ‘right’ sort of homes, what will their living conditions be like?


Whilst we are still a country of homeowners and even though there has been a slight growth in numbers, the long term trend is downwards if we don’t build enough of the ‘right’ new homes, in the ‘right’ location and the ‘right’ price, Southampton people will continue to increasingly rent ... which is only good news for Southampton buy to let landlords.


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, 18 October 2019

What’s the biggest street in Southampton (SO14)?



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

Well my recent articles about Southampton’s most moved street in the last 3 years and the Monopoly board article (the one where I listed the most valuable streets) caused quite a lot of interest locally, so I decided to see what else I could find out about the SO14 postcode area, and I have been able find out the biggest streets in the SO14 postcode area.

Don’t worry, I will get back to some hard-hitting articles about the lack of new homes being built in Southampton, the trials and tribulations of being a Southampton buy-to-let landlord and the future of the Southampton property market .. yet in this article because of the previous positive comments, I wanted to give you what you, the Southampton homeowners and Southampton landlords asked about and wanted!

The biggest street in SO14, when it comes to the number of houses on it is St Marys Road, with 422 homes. In second place is Golden Grove with 421 homes and in third is Ocean Way with 419 homes.

  
Yet, size isn’t everything and the most valuable street of the top 20 biggest streets is Channel Way at £133.3m with an average value of £354,000 per property.
The street with the greatest number of movers in the last 3 years is also Channel Way, yet its saleability rate was only 18.8%, with Royal Crescent Road having the highest saleability rate of 25.9%.

The full breakdown can be found in this chart below.


 Yet, did you really think I wouldn’t get at all serious ..

The basic rudiments of the Southampton property market remain principally healthy in many parts of Southampton, yet the existing political environment means that the vital element of confidence has been diminished slightly in certain parts, and that is triggering a minority of potential property purchasers and house-sellers to vacillate, yet with unemployment at an all-time low, a record number of people with a job, ultra-low interest rates and decent mortgage availability (with the Banks and Building Societies tending to drop mortgage rates instead of increasing them), those Southampton first time buyers (and especially Southampton buy-to-let landlords) who have adjourned their next house purchase because of perceived political uncertainty should be reminded that talking to many of my fellow Southampton agents they have more homes on their books than at any time for the last three or four years, so there is a greater choice of Southampton properties to call your next home/BTL investment with a potential of securing a great property deal in the next month or so.

Irrespective of what happens with Brexit, Southampton people will still need a roof over their heads and as I have mentioned on a number of occasions, I have proved beyond doubt we aren’t building enough homes both locally in Southampton and nationally. If supply is limited and demand increases (as the population grows and we get older), prices in the medium to long term can only go in one direction. Upwards!


So, whatever happens with BoJo and Brexit – why wait, because once we get over that hurdle, there will just be another hurdle and another hurdle and by which time – we will be in 2029 and you would have missed the boat. We survived the Global Financial Crash, 3-day week in 1970s’, hyperinflation etc etc …  yet the choice is yours.


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, 11 October 2019

How Many Southampton Homeowners Have Paid Their Mortgage Off?





The Government’s Annual Housing Survey is 50 years old this year.  It has taken a snap shot of the UK’s property market every year since 1969 and in the recently published report for 2018, it wasn’t a surprise that owner occupation is still the most predominant tenure, yet now more people own their home without a mortgage rather than having a mortgage as the number of people buying their first home (obviously with a mortgage) has declined since the Millennium.  The report also shows homeowners (mortgaged and owned outright) are, on average, older than renters and between the homeowners themselves, those who are mortgage free are older than those with a mortgage.
Looking at the most recent data for Southampton, I wanted to see how we compared to the national picture. Therefore, focusing on the main 4 tenures of owned outright, owned with a mortgage, social housing (i.e. Council Housing and Housing Association) and private rented, this is what I found out...



Looking at the stats, you can see that homeownership in Southampton as a whole (both owned and owned with a mortgage combined) is lower in the 25yo to 34yo age range compared to 35yo to 49yo, yet roll the clock back to the 1980s and opposite was the case.
So how many local homeowners have paid off their mortgage?

42.7% of Southampton homeowners are mortgage free, yet of the 13,962 households that are owned by 50yo to 64yo in Southampton, 54.5% of those people still have a mortgage.

As most people bought their first house in their early to mid 20’s back in the 1980’s, this shows that a lot of Southampton people must have re-mortgaged in the past and extended their borrowings (otherwise they should have paid their mortgage off now).

The other thing that concerns me is the 4.8% of the Southampton over 75yo homeowners that have a mortgage.

If you amalgamate the national historic ranges going back to 1977 (see the graph below “UK Households with a Mortgage by Age – 1977 to 2018” and note the age bands are slightly different to the recent local stats because they were carried out under different government departments), you will see the number of people who own a property with a mortgage has been dropping since the Millennium, yet nationally the number of people who own a property has remained roughly the same, even with the growth of the private rented sector.



Reports in the industry suggest that in the next ten years that will increase, as nearly 1 in 5 homeowners will be still paying off their mortgage after retirement. One of the reasons behind that will be the legacy of interest-only loans and delayed first-time buying as we become more and more like Germany in our house ownership models, where people naturally rent their homes until their 50’s and then buy when they inherit money from their parents.

In the meantime, demand for Southampton rental properties will only increase … so good news for Southampton Buy to Let landlords and indirectly Southampton homeowners as well.

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, 27 September 2019

Southampton Property Market Update Summer 2019





The foundations of the Southampton Property Market over the summer have continued to be principally sound; yet the existing political macroclimate means that the critical element of consumer confidence has been reduced and that is triggering some potential Southampton property buyers and Southampton house sellers to falter slightly and hang fire making any firm decisions on property.

With record low interest rates at 0.75%, low unemployment rates of 3.8%, and decent mortgage availability (even those with low deposits - there were 224 mortgage deals available on the day of writing this article where only a 5% deposit was required and 5 main stream lenders that would offer 100% no deposit mortgages), Southampton buyers have a lot going in their favour, aside from the perceived political uncertainty. 

Interestingly, Rightmove have stated there are more properties for sale today in the Country, than at any time since 2016, and Southampton follows that trend. Even with that in mind, property values have remained reasonably stable as The Land Registry has just released its House Price Index for Southampton and the surrounding locality and it makes very interesting reading.

Overall, property values in the Southampton area are 1% lower
than a year ago as the average property value in Southampton now stands at £295,200.

When I looked at the types of Southampton properties, a slightly different picture appeared..

·         Southampton Detached homes dropped by 0.6%
·         Southampton Semi-detached homes rose by 0.2%
·         Southampton Terraced/Town-House dropped by 0.5%
·         Southampton Flats/Apartments dropped by 2.3%

and the current values for these types of properties are ..

·         Southampton Detached £443,400
·         Southampton Semi-Detached £280,300
·         Southampton Terraced/Town-House £239,800
·         Southampton Flats/Apartments £178,100




Yet, Southampton Property Market Blog readers will know I always like to measure the health of the Southampton property market not only by house prices but transaction levels as well, so ..

5,425 properties were sold in the last year in Southampton,
 lower than the 10-year average of 6,103 properties per annum

Considering the uncertainty the Country has been through in the last three years with the ‘B’ word issue, I don’t think that’s too bad and shows the underlying resilience of the Southampton property market.

Now looking forward towards the end of the year .. how will Southampton house values change under the new Prime Minister?

Southampton buy-to-let landlords and Southampton first-time buyers seem to be sustaining their preceding activity levels, which is heartening news. It’s quite conceivable that both cohorts are presently profiting from the marginally increased numbers of Southampton homes on the market, which not only offers them greater choice, but aids with their negotiations. The suggested Stamp Duty changes made me look at previous Stamp Duty changes in the last decade and their effects have been rather short term.

That means those selling their homes in Southampton need to be realistic with their pricing, and, as most sellers also buy a property, what you might lose on your sale you will make up on the purchase. 


BoJo, Brexit … to be honest are all short-term distractions from the long-term issues of the UK and Southampton property market. Until we start building at least 300,000 properties a year to meet the demand for UK property, demand will always outstrip supply, meaning irrespective of short-term fluctuations that may (or may not) be caused by domestic and world events (including the ‘B’ word’), prices will always in the medium to long term remain stable and increase.


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, 20 September 2019

Is Southampton Too Densely Populated?




Has England’s green and pleasant land all of a sudden become England’s green and overcrowded land?

With the nation’s ever-increasing population and the double whammy that people are now living longer, this means as each year goes by, there is an ever-growing strain on public services and in particular my favourite topic - housing. It’s no wonder some people are saying things are at crisis point when it comes to infrastructure (like roads, schooling etc) and in particular housing.  I hear it all the time, people complaining that Southampton looks like a building site and, we are packing people in like sardines into our Southampton homes. Yet I wanted to find out exactly what the truth was.

Starting with the UK as a whole, there 698 people per square mile whilst in England, there are 1,103 people per square and finally in Greater London 14,587 people per square mile  … these all sound quite awful numbers, until you drill down and realise a square mile is an awfully big area - there are only 93,600 square miles in the whole of the UK and that includes the wilderness areas of Scotland!

Let’s look at more realistic areas of land ... and I want to look at my favourite - the acre. To those born after the mid 1970’s, an acre is roughly half the size of a football pitch or a square roughly 63 metres by 63 metres and there are just less than 2.5 acres in a hectare.

The population of Southampton (SO18) is 36,990 and the total area of 1,976 acres, meaning 18.72 people live per acre in Southampton (SO18)

So, how does that compare to neighbouring areas and towns...


As you can see, only just under 19 people live per acre in Southampton, interesting when compared to both Greater London, which has density of 23.26 people per acre and London’s most crowded suburb, Pimlico at 92.32 people per acre. Yet even Pimlico is nothing to the Collblanc district in Barcelona, which has 214.8 people living it per acre.

So, is Southampton over populated? Yes, it seems that way at school time or rush hour when sitting in traffic that Southampton is over populated – yet the stats show - we aren’t.

Evidently, we are never going to have an even spread of population as can be seen from the figures in the table, and the remote nature of some parts of the Country would not be able to withstand high densities of new people without enormous infrastructure investment.
Yet could we accommodate a much larger population in the UK (and Southampton) although there would be trade-offs? Look back at the 17th and 18th century and certain sectors of society were warning about population growth. The population of the UK in 1801 was 10.5 million and even with the growth of the population since then, only 1.2% of the UK is currently built on for housing purposes.

The question, it seems to me, is not can we manage but how
would a larger Southampton population change our way of life,
both for better and possibly worse?


The planners have a responsibility to ensure Southampton provides its fair share of new homes to accommodate this population growth in the coming years. The local authority has a responsibility towards adequate provision of the infrastructure of roads, hospitals and schools etc., to match the growth in housing. This is not a political topic and I hope once the ‘B’ word is finally sorted we can get on with addressing the shortage of affordable new homes for future generations.


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, 13 September 2019

Southampton Homeowners can now build larger extensions without planning permission.




The need for more homes has always been one of the biggest issues with regard to the Country’s housing crisis.  One of the main reasons for families wanting to move home is the need for more accommodation as their families grow and so in 2013 and 2015, the planning permission rules were relaxed to try an alleviate this issue.

Initially in 2013, Nick Clegg, as Deputy Prime Mister, brought in temporary planning rules to allow larger single storey rear extensions without the requirement of a full planning application.  The temporary rules allowed terraced and semi-detached homes to be extended by just over 19ft, whilst detached houses were able to add even bigger extensions of up to 24ft.  Since those rules were relaxed six years ago, 109,320 people have taken advantage of the temporary rules (aka “permitted development size guidelines”).

Homeowners wanting to extend within these permitted development guidelines, must still inform the local authority of the extension beforehand, and local authority officials still need to then notify the neighbours.  If the neighbours object, the local authority could still stop the extension being built, but only if it is likely to damage the character or enjoyment of the neighbourhood.  The planning process exists for a reason and whilst these relaxed planning rules are popular with property owners, it does mean local authorities have little chance to deliberate the impact of these extensions on their locality.  However, 22,779 permitted developments had been refused in the same time frame meaning, 17.2% of permitted development planning applications have been refused since 2013.
Now these temporary rules have been made permanent recently as the Government believe these measures will help households extend their properties without fighting through the time-consuming red tape of obtaining planning permission.  The government believes this is part of a package of planning reforms to build more households, build them better, quicker and make the housing market work, meaning families can grow without being forced to sell and move… or does it?

The average size of a property
in Southampton is 775 sq.ft

.. internally (888 sq.ft  externally), whilst to the national average 929 sq.ft internally (1,081 sq.ft externally).  Interesting when compared to the average size of a new homes built nationally which is 12.1% lower at 818 sq.ft internally (927 sq.ft externally).

These relaxed rules are only for single-storey extensions though, when most growing families don’t need an extra downstairs reception room, they need an additional upstairs bedroom.  This means if families do want an extra bedroom upstairs, they will still have to go through the rigmarole of submitting a full planning permission.  Although, many Southampton people have used these rules in the last 6 years to build a decent size granny-annex – there are other options less explored out there.

There was a second (less advertised) temporary change the Government made to planning rules in 2015, that has also been made permanent recently, many may have missed it, yet it has a bigger potential impact on the housing market.  The new rules make permanent the removal of planning rules to allow office blocks and shops to be converted into residential homes without a full planning application being made.  Since 2013, 11,090 office blocks and 1,750 shops have been converted into residential households.  This doesn’t sound a lot, but in 2017 alone, converted shops and office blocks provided 37,000 new households alone in the Country (or 17% of the new household created in 2017).


Over the next decade, more and more office blocks and shops will be converted into residential properties … and this will slowly change the dynamic of the housing market and the high street … and I’m not sure whether that will be for the good or bad ... only time will tell?


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.