Are Southampton House Prices Set to Fall this Autumn?

The stamp duty tax holiday is over, furlough finished at the end of September, unemployment is due to rise and inflation is rife … is this the end of the post lockdown Southampton property boom?

Surely, we are heading for house price correction?

Forecasting what will happen in the Southampton property market this Autumn may not be as simple as it first appears.

It’s true the Southampton property market is starting to settle down after an all-time number of property deals were completed in June.

More Southampton people will have moved home in 2021 than in any year since 2007, with an estimated 1.5 million home buyers nationally having bought a property.

Roll the clock back to last Christmas, and the Government’s Office for Budget Responsibility, projected that national house prices would drop between 6% and 8%.

By Christmas, the price of the average home in Southampton will be about £319,900 up 3.9% on last Christmas.

Let us not forget there were so many ambiguities at the start of 2021. We were about to start a 5-month lockdown, hospitals were bursting at the seams with patients, the vaccines hadn’t started, 4 in 10 employers had furloughed their staff and we had just had Brexit ... things didn’t look good.

Yet, nothing could be further from the truth 10 months later - the Southampton property market has been on fire. But after a heated summer in the Southampton property market, things certainly can’t carry on as they have been since the end of lockdown.

So, where are we with the Southampton property market as it stands? Taking reference from historical data on the website The Advisory (I would certainly recommend you check it out)…

 

67% of properties on the market today in Southampton

are sold subject to contract (stc).

How does this compare to October 2019 and October 2017?

In October 2017, 56% of Southampton properties were sold stc, whilst in October 2019, 44% of properties were sold stc.

Yet how does that compare to the national picture?

In 2017, 39.72% of the country’s properties for sale were sold stc whilst in 2019, that figure was 38.11%.

Now I love a good league table, so then decided to compare our locality to the rest of the country

So, I chose to look at the SO18 postcode specifically. For information, there are 2,234 postcode districts in the country.

 

The 2021 sold stats put SO18 in at 327^th place in

the country, 22^nd in 2017 and 168^th in 2019.

As we enter the last 3 months of the year, there are not so many uncertainties as there were at the start of 2021. On the good news front, 49 million Brits have had at least one jab (45m two jabs) and the UK will be the world’s fastest growing advanced economy this year according to the IMF.

Conversely, the furlough scheme ended at the end of September and with energy prices going through the roof, a real shortage of homes for sale (as I have discussed a number of times in recent blogs) and rising inflation on the back of a shortage of raw materials and trained staff, forecasting this and what will happen to Southampton house prices might not be as easy as it seems.

Post stamp duty holiday, it is now recognised that the majority of the demand for people moving home is focused by a profound unhappiness and frustration with the homes we live in, revealed during the first lockdown in 2020.

Buyers (and tenants – so take note Southampton buy-to-let landlords) want space ... in fact, three types of space … and they will pay handsomely for them!

 

·         Office space (be that bedroom or study)

·         Outside space (gardens or proximity to green areas)

·         Broadband with ‘outa-space’ download speeds

 

And whilst there is a shortage of properties coming on to the market, demand and supply economics mean…

 

Southampton house prices should remain relatively stable

 going into 2022.

 

The number of properties coming onto the market in Southampton is slowly improving, yet not enough to diminish house values.

Also, don’t forget Southampton first-time buyers still have stamp duty relief all to themselves again and mortgages are cheap. At the beginning of the 2020 lockdown (spring 2020), mortgage providers removed their higher risk 5% deposit mortgages for fear of a housing market crash. Currently, the vast majority of these low 5% deposit mortgages are back, together with the Governments own 5% deposit mortgages.

 

Yet many Southampton homeowners are concerned about inflation

and its effect on their mortgage payments.

 

Inflation is important because if inflation gets too high, the Bank of England will need to raise interest rates to reduce inflation. Because mortgages payments are based on the bank of England interest rate, higher mortgage payments will affect what people can afford. Normally the higher the mortgage rate, the less likely house prices are to increase (and in fact if interest rates are too high, house prices will fall).

Whilst I can’t give you advice, with the Bank of England base rate at a 300-year historic low of 0.1%, I’m still surprised that nearly 3 in 10 Southampton homeowners with mortgages are not on a fixed rate mortgage. There has never been a better time to get a fixed rate mortgage, as there are deals out there with interest rates as low as 1%. This means even if interest rates do go up in the short term, you will be protected from higher mortgage costs. Anyway, back to inflation.

 

Inflation did rise quite quickly and steeply in 2008/9

but came back down within a year.

 

This was because of a shortage of staff and raw materials during the Credit Crunch of 2008/9, the very same issues we’re experiencing at the moment in Q4 2021. The type of inflation (yes, there are types of inflation!) in 2008/9 was called ‘push inflation’. Whilst inflation is not great, ‘push inflation’ could be described the better type of inflation (as long as is it doesn’t go on for too long).

The economic crippling hyper-inflation seen in the 1970s was ‘pull inflation’. The circumstances that create ‘pull inflation’ are not being experienced at the moment in the UK. This is good news because ‘pull inflation’ is bad inflation, which in turn would create massive problems to the UK economy as a whole.

Therefore, whilst inflation will probably rise to 4-5% by Christmas, I don’t believe the Bank of England will raise interest rates substantially as the message we are hearing from them is they see this as a short-term blip.

 

Opportunities for Southampton buy-to-let landlords?

 

Ultra-low mortgage rates and a booming rental market is encouraging more Southampton buy-to-let landlords to expand their rental portfolios, yet their strategy is changing. Yields are increasing as there is a shortage of rental properties, driving up rents. Also, there are Southampton landlords looking to exit the rental market, often because they want to liquidate their portfolio for retirement. These portfolios don’t make it onto Rightmove and get sold ‘off market’.

Therefore, if you are a serious Southampton buy-to-let landlord and you’re looking to expand your own portfolio, it’s really important to put yourselves on the mailing list of estate agents and also build up great one-to-one relationships with the same agents to ensure that you’re at the front of the queue for these off market rental portfolios and not at the back.

To conclude, nobody knows the answer to what will happen to the property market in Southampton as we go into 2022. There are many factors that could affect the market in a positive and negative way, yet buying property is always a long-term investment (be it for yourself or to rent), so if you need any advice or opinion on what you should do, drop me a line or pop into the office and we can discuss the options you have over a cup of coffee.

Has Buy-to-Let Changed the Southampton Property Market?

 

The ‘Buy-To-Let’ Mortgage is celebrating its Silver Anniversary (25 years) this autumn.

Isn’t it fascinating that a decision between a group of letting agents and bankers all that time ago to offer ‘Buy-To-Let’ (BTL) mortgages has changed the face of the Southampton (and national) property market?

But has it been a good thing? Or has it ruined the dreams of many 20 somethings wanting to get on to the property ladder in the last couple of decades?

Let’s look deeper at the whole story, then I will let you, the reader, decide.

As soon as the BTL mortgage was launched, it was clear there was an enthusiasm and a need for this mortgage product. So much so the size of the Southampton private rented sector has grown exponentially.

According to my analysis…

there are 25,247 private rented homes in Southampton, worth £7,967,095,000.

So now we are in 2021, it seems farcical that banks and building societies once thought that properties rented out to private tenants would not create a steady income or increase in value, yet this thought was conventional back in the 1990s.

 It’s no wonder BTL landlords have been given a hard time, with numbers like this.

Yet before we burn every landlord at the stake, let’s just look at the background story.

The Conservatives introduced the right of a council house tenant to buy their own council house in the early 1980s. Fantastic news for council tenants, yet when a council tenant bought their home, that meant that council housing was taken away from future generations to rent and therefore eroding the council housing stock available. Meaning from the mid 1990s /early 2000s, people who would normally be eligible to rent from the council, yet who couldn’t buy, had only one option … rent from a private landlord.

Meanwhile, in the early/mid 1990s we had 15% mortgage interest rates, unemployment rates of 9% and the 1989 housing crash fresh in people’s memories. Repossessions were rife, making home ownership not the most attractive prospect for 20 somethings.

Southampton house prices dropped by 30.7% between 1989 and 1993.

This meant as we entered the mid 1990s, the Southampton property market entered a period of stagnation. There were many Southampton homeowners that bought their home in the property boom of the late 1980s who were disinclined to sell their home for a loss. They were in negative equity (i.e. they owed more than what the house was worth) yet needed to move because of their growing families.

Renting their home out could have allowed them to buy another home for their growing family, but most banks and building societies were still mostly unreceptive to the notion of these homeowners becoming accidental landlords. Most mortgage terms and conditions usually included clauses that prohibited homeowners from renting out their homes.

So, with growing demand from potential tenants, supply reduced from the sale of council houses and many homeowners in negative equity, all bound up by the semi-deregulation of the private rented sector with the Housing Act 1988 – you can see that the BTL mortgage came along at the right time.

Early take up of BTL mortgages was slow in the first couple of years.

By the Millennium, according to the Council of Mortgage Lenders, there were just over 120,000 BTL mortgages, with a total value of £9.1 billion.

Yet as we entered the 2000s, they really took off, with every man and his dog jumping onto the BTL bandwagon. So much so that today in the UK, there are…

4.4m private rented homes, 2.1m of them with BTL mortgages totaling £234.1bn, which is 11.9% of the UK’s GDP!

That’s more than a 1,650% increase in the number of BTL mortgages to landlords and a 2,470% increase in the value of those BTL mortgages.

Since 2001, the number of privately rented households in the UK has grown from 8.3% to 19%.

On the face of it, you could say with the growth of these BTL landlords with their cheap BTL mortgages and often unkempt properties, it has pushed potential homebuyers into squalor. Yet, let’s look a little deeper.

Most Southampton landlords are very fair with their Southampton tenants providing them with clean, well presented and affordable housing. Of course, there are the rogue landlords but with TV shows such as ‘Landlords from Hell’, the British public are given a distorted and uneven view of private landlords as a whole.

Private sector landlords have played a critical role in providing homes to millions of Brits in this country, let me expand.

The UK population has grown by 405,000 people per year (for the last 20 years), yet only 22,750 council/social houses have been built per year in the same time frame.

If it wasn’t for the rented sector, who would have housed all the extra people in the country over the last 20 years? 

What about the exorbitant rents? Would it surprise you that rents have risen below inflation between 2008 and 2019?

Also there has been a drive to tax BTL landlords more comprehensively and regulate the private rented sector to develop better housing conditions for tenants.

Unlike owner-occupier homes, tenants get the benefit of new regulations from Gas Safety Checks and Electrical Safety Reports. Also, BTL landlords will need to improve their Energy Performance Certificate Rating to at least a C rating by the end of 2025 for all new tenancies, and by end of 2028 for all existing tenancies, all at no cost to the tenant and directly saving them money on their heating costs – something that is very important considering the recent rises in gas prices.

 Southampton landlords have also had to pay more tax on their Southampton BTL properties, paying 3% Stamp Duty tax supplement for the last 5 years, and higher rate tax relief on mortgage interest was taken away four years ago.

Landlords have also had to deal with the financial fallout of the pandemic. It is estimated 1 in 5 tenants in the private rented sector have some form of rent arrears.

Interestingly landlords that don’t use a letting agent to manage their property are 272.5% more likely to be 2 months or more in arrears.

Also, evictions for rent arrears were banned during the pandemic, meaning some tenants ran up arrears of 12 months or more. According to the National Residential Landlords Association (NRLA), this has left around 210,000 private tenants in the country facing a court order for rent arrears. That would equate to…

1,355 Southampton private rented households with a court order for arrears.

The idea that Southampton landlords are middle-class establishment types who are out to take advantage of Southampton tenants who can’t afford to buy their own Southampton homes is, in my opinion, just wrong.

Of course, there are some rogue Southampton landlords, yet there are plenty of rogue tenants. Just because you are a Southampton landlord, it doesn’t mean you are quaffing champagne and rolling in cash.

 4,534 Southampton landlords own just one BTL property.

And just under half of those use their rental income to supplement their pensions, and according to the NRLA, a third of landlords have a gross income (excluding income from the BTL property) of less than £20k per annum.

It’s hard work being a Southampton BTL landlord and I still believe the burden of housing just under a fifth of the UK population isn’t appreciated or taken seriously by Government.

Notwithstanding the challenges, most Southampton BTL landlords are in it for the long run. BTL mortgages can be secured for less than 1% and demand is on the rise (with rents rising at the highest rate for 10+ years). Of course, Brexit caused a few issues with some Southampton landlords losing some Eastern European migrants. Yet once things settle down, we will have an influx of people coming from Hong Kong and Afghanistan, wanting to settle down, get jobs and ultimately require a home to live in, which will be a private rented house.

I know the Stamp Duty tax holiday has cleared out the Southampton landlords who were on the fence for staying in the private rented sector or selling up, but those Southampton landlords that are left will be more professional and will run their BTL portfolio as a business, not a hobby.

My final piece of advice to anyone thinking of becoming a BTL landlord in Southampton for the first time is that you have to have a strategy and plan ahead. Those who stumbled into the BTL market in the early 2000s made a lot of money without any strategy or tactics. 

Moving forward you need the guidance and support of an agent who can tell you the best places for investment, be that for better yield or better capital growth.

They will also be able to tell you what tenants demand to ensure that you attract the right sort of tenants who won’t trash the place and leave you in arrears. If you would like some advice, do not hesitate to drop me a line or pick up the phone.

Only 1 in 36 Southampton Properties are Bungalows, Despite an Ageing Population. Why?

The bungalow is a building that has represented a more leisurely, gentler way of life since the early 1900’s. Bungalows have been sold as an aspiration for those about to retire, saving them the annoyance of having to climb stairs. With an ageing population, one would think they would be building more bungalows, yet nothing could be further from the truth. In fact, this could be one of the main issues that is holding back many mature homeowners moving home thus creating a bottleneck in the Southampton property market for the younger families who are being held back and unable to move into the larger homes they so need to grow their families.

So, before I answer that question, let me share this fascinating fact about bungalows. The word ‘bungalow’ originated in India, not the UK. The name is derived from the Hindi word ‘baṅglā’ or the Gujarati word ‘baṅglo’, both of which seem to refer to a home occupied by a Bengali person. The colonial English started to use it for themselves in the late 1600s to describe the same sort of basic lodgings that sailors and staff of the invading East India Company used.

Anyway, back to the here and now in Southampton.

There are 2,960 bungalows in Southampton.

When you consider there are 105,350 properties in Southampton, that means only 2.81% of property in Southampton are bungalows.

To give you an idea of the age demographic of Southampton homeowners, there are 23,311 Southampton homeowners aged 65 years old (and over) and 27,027 Southampton homeowners aged between 50 and 64 years of age.

You can see demand for bungalows is only expected to grow.  Yet new homes builders are having to deal with soaring land prices, meaning to get a profit from the site they are under pressure to build more vertically than horizontally as with bungalows (as bungalows take up so much more land).

The last available data is from 2018 and only 1.6% new builds in the UK were bungalows, interesting when it was just over 7% in the middle of the 1990s. As British people are living longer, those existing Southampton bungalow homeowners will be living in them longer, thus creating even more of a bottleneck in the Southampton property market.

So, what is the answer?

Well with building land in Southampton at a shortage, maybe new homes builders should be forced under planning rules to reserve ground floor apartments to be set aside for older people to encourage them to move out of larger houses. I would challenge the long-held point of view that building more bungalows in Southampton is the pre-eminent way to urge growing numbers of mature ‘last-time buyers’ to move out of their under-occupied Southampton homes and free up their large homes (where their children have flown the nest) for younger Southampton families to grow.

With the new Planning Regulations due to be in place in a couple of years, local authorities could require builders to set aside a share of homes for mature residents, as they are already obligated to subsidise local community facilities or low-cost social housing in return for obtaining their planning permission to build in the first place.

Another option would be to convert all those empty shops in our town and city centres up and down the country into residential use. There is no need for planning permission to change offices to residential property and the Government are considering the same for shops (although I have heard of some horror stories of those office to residential developments making rabbit hutches look spacious) – so again, it comes down to the planning laws and making them fit for purpose.

There are no doubt consequences of not designing our housing stock for the 21^st Century and beyond for older people.

 

The population of Southampton is set to grow

by 46,564 to 291,636 by 2040.

As the UK population gets older in the coming decades, as life expectancy is set to grow from 81 years 2 months to 83 years 3 months by 2040, I fully appreciate the need for more Southampton homes to be built for families, yet one must ask if the planning authorities are focusing too much on new housing for the younger generation, when they in fact should be encouraging new homes builders to develop larger, ground floor two-bedroom homes and decent accessible transport links.

These are my thoughts, what are yours the good people of Southampton?

Southampton’s Love (and Hate) Affair with the Semi-Detached House

The Semi-Detached House – the icon of middle-class aspiration, the pinnacle of liberalism yet at the same time compromised individuality, the ‘semi’ as it is colloquially termed is, for many Southampton homeowners, the highpoint of modern domestic bliss.

Britain’s gift to architecture is the humble ‘Semi-Detached House’. This type of property has been exported around the world with - the ‘Doppel Haus’ in Germany, the ‘Duplex’ in the USA, Canada and Australia. 

For those young, hip and trendy people living in your converted warehouses with strobe lighting and exposed brickwork, it might surprise you the semi is the dream home of an immense number of Southampton people. In fact, it is the most common dwelling type in the British Isles, with 8,060,657 semi-detached homes occupied by Brits alone (representing 31.68% of all occupied property) compared to 23.81% detached, 25.49% terraced and 19.02% flats.

In Southampton alone, there are 27,722 semi-detached houses meaning …

27.4% of properties in Southampton are semi-detached.

 

So, when did the semi-detached house first come into play? Many people think the semi-detached boom started with mass swathes of the suburban mock Tudor bay fronted semis being built between the first and second world wars. The fact is that it was actually rich landowners in the post Great Plague (1665+) years wished to house their farm labourers as inexpensively as possible, yet making their grand estates look as imposing as possible.

 

And that’s the point of a semi-detached house. Only half the property is yours, yet you ‘feel’ like you own it all.

The next phase of the semi-detached story, and a phase that really pushed home the point, were many of the late Georgian houses built around the Kensington Gardens area in West London. Many upper-middle class Georgians were wanting something more than the classic Georgian terraced house yet couldn’t afford a large detached home. Therefore, architects took the humble semi-detached house to the next stage of its evolution by masquerading the building itself as one home by slipping its two front doors down opposite sides of the building, making it look like one home from the front, to complete the impression of total ownership.

 

By Victorian times, semi-detached houses fell out fashion as the railways were building many of them for their railway workers and they became associated with the lower working classes but speculative builders continued building semi-detached homes for the new lower middle class, that is the reason why ultimately the country is full of semi-detached homes today.

The semi-detached house was saved from the annals of history by the Bedford Park development in Ealing (London). Referred to as the world's first ‘garden suburb’ and started in the 1870’s, the architect of Bedford Park used influences of the ‘Aesthetic Movement’, the precursor to the ‘Arts and Craft Movement’ to make the buildings look more pleasing on the eye. The architect also took reference from the style of properties from British history such as Queen Ann to be seen in such features as a sweep of steps leading to a carved stone door, rows of painted sash windows in boxes set flush with the brickwork and bright coloured brickwork with limestone stone quoins emphasising the building’s corner.

As the car enabled people to commute to work from further away, people wanted to get out of the big cities, thus giving rise to the interwar semi, with its mock Tudor fronted, rosemary tiled roof, oak beamed, herringbone brickwork and the leaded and stained glass windowpanes that we all recognise. It was Bedford Park that gave the green light for architects up and down the country to use old styles of building design to make their semi-detached houses look the part.

And now, in more modern times, the semi-detached house has gone from strength to strength.

16,720 of Southampton semi-detached houses have changed hands since 1995, many upwards of 5 times (and a handful even more).

The semi continues to appeal, both to big national builders and smaller Southampton developers, and most importantly to home buyers. The advantage of semi-detached houses over town houses/terraced houses or apartments is they afford access to their (typically bigger) gardens without having to pass through the house, and they have natural sunlight on three sides of the property, are easily extendable and quite often have a driveway.

And that’s at the heart of what a semi-detached house is all about, the schism or divide of the semi reveals the tension at the heart of owning your home, which on one side of the coin is a commodity/way to make money and on the other side, a vision to have your own castle, a piece of ground to call your own. It articulates both the craving for personal freedom and the inevitability of socio-economic life. What do I mean by that?

We may dream of owning a castle in many acres, with a drawbridge and moat, yet real life means we can only afford half a building plot sliced out by a volume national builder next to the A335.

I just love a semi-detached house! Style and substance combined.

What are your thoughts? Share your stories and opinions on the humble semi-detached house.

Southampton Home Moves Hit Record High in June

as 200.1% more people sell in June compared to the Southampton area 10-year average

June 2021 was the busiest month ever for UK estate agents, home removal companies and conveyancers since monthly records began, as HMRC logged 213,120 residential transactions in June, a jump of more than 216% nationally on the same month last year (when the housing market had just reopened after the initial lockdown). 

 

The cause of this was all the homebuyers trying to complete their property purchases before the approaching Stamp Duty Holiday deadline finished at the end of June. This was important as house buyers had until 30th June to complete their sale to save up to £15,000 in Stamp Duty Tax.

 

Many property market commentators believed the property market would slump after the Stamp Duty Holiday finished. Yet, I haven’t observed many property sales falling through or renegotiations because the buyer had to pay the extra Stamp Duty, and talking to other property professionals around the UK, neither have they.

 

Let’s not forget that the Stamp Duty Holiday isn't totally over as it is a tapering off until 30^th September. This means homes and apartments sold under £250,000 will still profit from the Stamp Duty Holiday.

 

So, what sort of property transaction numbers are we talking about here in Southampton?

 

An average of 292 properties a month in the Southampton area have sold in the last 12 months, compared to the 10-year rolling average of 490 properties sold per month.

 

The best month ever before this June was March 2016, when there was a rush by Southampton buy-to-let landlords to secure a property before the introduction of a 3% Stamp Duty surcharge for second homes. In March 2016, 1,182 Southampton properties changed hands.

 

My calculations show 1,470 Southampton households sold in June 2021, 200.1% more than the long-term average.

 

So, what has driven this? The Stamp Duty changes caused some Southampton people to bring their home moves forward from 2022/3 to take advantage of the tax savings. Yet the most significant thing, talking to many Southampton homebuyers and sellers, is the pandemic has changed the way people live. Working from home and needing additional office space has meant many Southampton families (and others from out of the area) are seeking larger properties with more extensive gardens and better access to the countryside. I really can't see this social trend changing for a long time. I believe this means Southampton property prices in the medium term will not be markedly different over the next couple of years yet…

 

don't be alarmed to see volatile short-term changes in the run-up to Christmas (both up and down) with Southampton house prices.

 

I have always been a believer in the medium-term (i.e. over a couple of years) house price trends instead of the monthly trends, which can sometimes be like a yo-yo. I have always said the best bellwether to the health of the Southampton property market is the number of property transactions rather than the house prices.

 

Finally, I can only see this continuing as Banks scrabble to give money away in the form of cheap mortgages. A few weeks ago HSBC and TSB launched a 0.94% two-year fixed rate deal for those wishing to borrow 60% or less. More recently, the Nationwide Building Society launched a 0.99% five-year fixed-rate mortgage deal (again on a maximum of 60% loan to value basis).

 

If you would like a chat about the Southampton property market, your options and where you stand in the Southampton property market – please do not hesitate to give me a call.

 

In the meantime, I would love your thoughts on this. Has the pandemic made you move home earlier?

What do you think will happen in the coming years to property in Southampton? Share your views.

 

£632,700 – ‘Wood’ You Pay That for a Southampton Semi-Detached House?

 

The value of an average Southampton semi-detached house has increased in value by £18,832 in the last 12 months, an increase in value of 6.31%.

Yet the costs of building a Southampton home have shot up even more in the last 12 months, meaning the price of Southampton new homes and any building works you do to your Southampton home in the coming months and years could be a lot higher.

The British house building profession is experiencing a building materials supply problem. Everything from cement to bricks, timber and roof tiles, plastic guttering, copper wire and pipe to insulation, even kitchen sinks have become scarce – and when people can find them, they are costly.

For example, looking at the timber industry, three-quarters of the UK's building timber comes from abroad, so lockdowns around Europe put a restraint on the timber processing industries of Sweden, Lithuania and Latvia throughout 2020. In addition, building material supply chains were interrupted due to the lockdowns imposed by their governments, resulting in many sawmills in those countries restricting shift work to comply with their country’s social distancing rules. Some mills even stopped all work for eight weeks last year, meaning they were incapable of cutting, milling or treating timber, causing their existing stocks of building wood to run dry. 

Yet, whilst we were all in lockdown, everyone started doing DIY projects, so the public demand for building timber in the UK remained high, giving little opportunity for UK sawmills (let alone North-eastern Europe) to catch up and restock to the levels previously held before the pandemic.

 

Building timber costs 112% more than a year ago, steel RSJ’s are a lot more expensive because iron ore has gone up 120.1% whilst aluminium is up 56.8%, and copper is up 59.7%.

 

All the blame cannot be laid at the feet of the virus and lockdown. The ‘B’ word caused issues with supply at the start of the year. Building materials are a worldwide supply chain issue; this Spring’s Suez boat crisis, when many boats were diverted around Africa (as the length of time the blockage was going to last was unknown) exacerbated the problem. All this has combined to make the cost of sending a 40ft container from China to Tilbury Docks £7,576 today, compared to £1,195 just before the crisis. Also, supplies of sand and cement are particularly low with massive demand from the large £98bn High Speed 2 (HS2) rail project. All this combined is affecting many building projects, big and small, across the UK.

 

If an average Southampton semi-detached house had risen by the price of building timber in the last 12 months, today it would be worth £632,700, not the current £317,275.

RSJ (steel joists) take twenty weeks to arrive, compared with the typical five weeks, whilst plasterboard is being rationed with weeks of delays for the ‘good stuff’ and MDF wood, usually takes seven days to arrive; now it takes over a month. Roof battens need to be ordered a month in advance, whilst pre-lockdown they were commonly held in stock by every building merchant.

Demand for building materials has increased so quickly because many British homeowners are driving the explosion. Those people in safe jobs with little opportunity to spend money on foreign holidays and fancy restaurants decided to invest in their property and gardens. According to the Bank of England, this craving for home improvement has particularly exploded since the mature generation started to be double jabbed (their savings accounts have increased by £180bn during the pandemic).

As I have explained in previous articles, these increases in the price of raw material will fuel inflation, possibly affecting interest rates upward. An increase in interest rates will make a material difference to the value of Southampton property. To what extent? Please read my previous articles on the Southampton property market.

Please do share your stories of issues with builders and building materials over the last 15 months in the comments. I appreciate any stories you can provide to help others in Southampton.

 

33.5% of Southampton Landlords Could be Fined £5,000 each with New Energy Regs

 … whilst possible new mortgage rules for Southampton homeowners would make it harder to sell their draughty old properties

As the UK has committed to a legally binding target to be carbon neutral by 2050, one of the biggest producers of greenhouse gasses are residential properties. To hit that target, every UK property will need to achieve a minimum grade of C on their Energy Performance Certificate (EPC) by 2035. The issue is two thirds of UK’s homes (around 19 million households) are rated D or below.

To help the country hit its targets, in 2018 and again in 2020, the EPC requirements altered for buy-to-let landlords, meaning they couldn’t rent their property unless it had a minimum energy rating of ‘E’ or above.

And now for homeowners, the Government are considering forcing banks and building societies to publish the average EPC rating for all the homes they lend money on and if the banks and building societies don’t hit the Government EPC targets, they will be fined (meaning those homeowners with low energy efficient properties will have to pay much more for their mortgages).

So, let’s look at these two issues, first regarding Southampton landlords and their EPC’s, so you know what your lawful responsibilities are and what else Southampton landlords can expect in the future.

Since October 2008, all UK rental properties have required an EPC, yet from April 2018, the Minimum Energy Efficiency Standards (MEES) regulations with regards to EPCs have also required all rental properties with new tenancies and renewals to have a minimum EPC rating of ‘E’ or above. However, since April 2020, the MEES regulations have applied to all existing tenancies as well, meaning if your Southampton rental property doesn’t have a valid EPC rating of ‘E’ (or above), it is illegal to let out.

 572 rental properties in Southampton are currently let out with a ‘F’ or ‘G’ EPC rating, making them illegal to rent out and each landlord liable for a £5,000 fine – they just don’t know it (That’s £2.86m in total)

The EPC lasts for 10 years and gives an energy rating of between A - very energy efficient to G - very energy inefficient. If you find yourself, as a Southampton landlord, with a rental property that has an EPC rating of below ‘E’, what are your options?

To start with, you have a responsibility by law to carry out the changes suggested in your EPC report to improve the energy rating of your property. The law states that landlords should spend up to a maximum of £3,500 on the energy efficiency improvements set out in the EPC. Yet, if by spending £3,500, that improves your EPC rating but doesn’t mean you reach the ‘E’ rating, whilst you will still be expected to improve the rental property and spend the money, you will be able to apply for a high-cost exemption via the PRS Exemptions Register and still let the property (even though you will have an EPC rating of F or G).

It must be noted that some properties are exempt from the MEES legislation. If your property is listed or protected and the improvements would unacceptably alter it, it is exempt from EPC requirements.

Once your EPC has been registered, it is then valid for ten years. Because the EPC regulations came into force in 2008, there will be some rental properties that had their initial EPC and not had it renewed on its 10^th birthday. Now as a Southampton landlord, you do not need to get a new EPC if your EPC reaches its 10^th birthday, unless that is, you are starting a new tenancy with new tenants. The issue is…

 of 24,449 rental properties in Southampton, 8,199 of them have an EPC that is 10 years or older which has not been renewed

If you are a Southampton landlord and your EPC is 10 years old (or older) and your tenant leaves, you will require a new EPC, because if you don’t, you will be fined £5,000. If all those buy-to-let landlords in our local authority area ignored that law, accumulatively they could be fined £40.9m.

 Secondly, what about Southampton homeowners and the mortgage companies?

Under new legislation being considered, homeowners living in poorly insulated and draughty homes (meaning they would have a low EPC rating) could pay more for their mortgages and lose value from their Southampton homes under Government plans to prioritise mortgages on properties with high energy-efficiency ratings.

 There are 19,625 properties in Southampton with a rating of ‘E’ or below

The Department of Business (DoB) wants to force mortgage providers to classify the energy ratings of their borrowers’ homes and put the average into a Government league table, which will be presented on the DoB’s website. Mortgage providers will then get time sensitive targets to improve their average EPC scores, punishable by fines, meaning this would increase the mortgage costs for those with low energy efficient homes.

Maybe it’s time you looked at your EPC certificate and find out how you can improve your rating? If you are a Southampton landlord or Southampton homeowner and would like to chat about your legal position or would like a copy of your EPC emailing to you, don’t hesitate to drop me a line and I will be more than happy to discuss your personal circumstances further without obligation.

So, is it right Southampton landlords should have to fork out to improve the energy performance of their rental property, yet they aren’t the ones benefiting? Also, should Southampton homeowners have to have higher mortgage payments in the future because they have a low energy-efficient home?

 

Let me know your thoughts.