Unveiling the Secrets of Southampton's Housing Market: Insights from the 2021 Census

The property market is one of the most important economic indicators, as it can significantly impact the prosperity of both the local and national economy.

Recently, new data from the Census 2021 has become available that sheds light on seldom discussed areas of property, such as the types of properties Southampton has, together with how we live in and use our homes.

This data could be of interest to all Southampton people. However, it should be fascinating to Southampton homeowners and landlords, as it can help them make informed future decisions about buying, selling and renting property.

Furthermore, comparing the data to the national statistics can provide a broader perspective and a better understanding of how we live in our homes in Southampton.

In this report, I will analyse seven measurements from the new Census data to assess the city's housing stock and provide valuable insights for potential buyers and sellers.

The seven metrics I have selected provide essential information about the city's demographics, housing types, and tenure.  

 

1.      Population and households of Southampton.

Knowing the population of a city is essential for a variety of reasons. First and foremost, it helps us understand the demographic makeup of Southampton. This information is crucial for local authority officials and businesses as they decide where to allocate resources and how to serve the community's needs (like whether we need to build more new homes, for example).

Looking at demographics allows for better long-term planning and development (and for savvy buy-to-let Southampton investors to spot opportunities years in advance). Additionally, population data can help identify trends and changes in the community over time (I will revisit this in future articles where I will discuss the growth of Southampton over the last few decades and what that means for the property market and long-term house prices). Finally, having accurate population figures is necessary for allocating government funding and resources, making it critical for our city's overall health and well-being.

 

The population of Southampton currently stands at

249,600 in 102,600 households.

2.      The age profile of the people who live in Southampton.

The age profile of a city's population provides valuable insights into the local property market. For example, suppose the city has a large population of retirees. In that case, it is more likely to have a higher demand for bungalows or sheltered accommodation. In comparison, a city with a large student population may have more demand for shared accommodation. Knowing the age profile of the city's population is crucial for targeting the right buyers and understanding the potential market for different types of properties.

 

13.5% of Southampton's population is 65 years and over,

compared to the national average of 18.4%.

Again, I will delve into this in more detail in my articles on the Southampton property market in the coming months.

3.      Southampton household composition - one-person households vs family households.

Understanding household composition is crucial for predicting the demand for different properties. For example, if the city has a large population of single people, there may be more demand for one-bedroom apartments or studios. However, if the city has many families, there may be more demand for three or four-bedroom houses and schools.

 

32.9% of Southampton households are one-person households (compared to 30.2% nationally), and 57.3% of Southampton households are single-family households (compared to 63.0% nationally).

 

The remainder is made up of shared accommodation etc.

4.      Southampton accommodation types - house or apartment.

Knowing the accommodation type is critical in understanding the local property market's demand and supply. For example, if the city has many apartments, it may indicate that the city has a higher demand for properties with lower maintenance costs or land is too expensive to build houses on. Conversely, if the city has a higher than the national (or regional) average number of houses, it may indicate that it has more families looking for larger properties.

 

58.5% of the homes in Southampton are houses

(compared to the national average of 77.9%).

5.      Number of bedrooms in Southampton.

The number of bedrooms is another crucial factor that affects the local property market. Knowing the average number of bedrooms in the city can help predict the demand for different property types. For example, if the city has many four or five-bedroom properties, it has more affluent buyers looking for larger properties.

·         20.5% of Southampton homes are one-bed households (11.4% nationally)

·         30.1% of Southampton homes are two-bed households (27.1% nationally)

·         36.7% of Southampton homes are three-bed households (40.4% nationally)

·         12.6% of Southampton homes are four-bed or more households (21.1% nationally)

6.      Occupancy rating for Southampton bedrooms - whether a property is under-occupied or overcrowded.

Knowing the occupancy rating for bedrooms is critical in understanding the local property market's demand and supply. For example, if the city has many under-occupied properties, it could indicate people living in homes too big for their daily needs.

 

24% of Southampton homes have two or more spare bedrooms

(compared to the national average of 42.7%).

7.      Tenure of Southampton households - whether owned outright, owned with a mortgage, social housing or privately rented.

Understanding households' tenure is essential in understanding the local property market's demand and supply. For example, if the city has a high number of households in social housing, it may indicate that there is less demand for private rental properties. Conversely, if the city has an increased number of households owning properties outright, it usually suggests that there are more older homeowners (compared to younger homeowners)

·         22.6% of Southampton households own their home without a mortgage (compared to 32.8% nationally)

·         26.3% of Southampton households own their home with a mortgage (compared to 29.7% nationally)

·         21.9% of Southampton households live in social housing (compared to 17.1% nationally)

·         29.3% of Southampton households live in private rented accommodation (compared to 20.4% nationally)

So, what is all this telling us?

The seven metrics discussed in this article on Southampton provide valuable insights into the city's demographics and the future of Southampton’s property market's demand and supply.

As a Southampton estate agent, having a deep understanding of these metrics can help me better target potential buyers, predict the demand for different types of properties and provide valuable insights and advice to Southampton house sellers, buyers and buy-to-let landlords.

If you are considering moving home in 2023 and want to know how this data will affect your buying or selling decisions, please do not hesitate to contact me for a personalised no-obligation no-cost consultation.

I am here to help you make informed decisions and find your dream property in this thriving city of Southampton.

 

Cautious Optimism in the Southampton Property Market

 

As the British and Southampton property market navigates the ongoing economic turmoil, many Southampton homeowners and landlords may feel uncertain about the future.

However, up-to-date data suggests that the 2023 property crash predicted by the many newspapers and the usual clickbait doom-mongers in the lead-up to Christmas on social media, may not be as bad as initially thought, and there are reasons to be cautiously optimistic.

According to property website Rightmove, the average asking price of a home for sale in the UK rose by just £14 in February.

While this might sound like cause for concern, asking prices remaining flat rather than falling could be seen as a positive sign for the year ahead. Remember that they are only what people are asking (and not necessarily achieving).

So, what exactly is happening in the Southampton property market?

Well, it all starts with realistic pricing.

 

Thankfully, most Southampton sellers are heeding their estate agents' advice and being more realistic on price, helping maintain market stability.

If you are realistic with pricing, the property should sell.

The time it takes to get a property to sale agreed upon has increased nationally from 21 days in the summer of 2022 to around 50 days in Q1 2023.

Additionally, despite the turbulent economic conditions, buyer demand is rising. Rightmove also reported in the national press that the number of people contacting estate agents has increased by 11% in the last two weeks compared to the same period in 2019.

The number of sales agreed upon has also rebounded.

 

Nationally, from 1^st January to the 19^th February 2023,

134,886 properties had been sold subject to contract in the UK.

Not a good figure when I compare it with the same year-to-date sale agreed figures from the last couple of years.

2022 - 173,607 properties sold stc

2021 - 193,607 properties sold stc

But the last couple of years have been extraordinary for the UK property market and should be taken with a pinch of salt in some respect. We must compare 2023 with more normal years, like 2017/18/19/20. This tells a different story.

2020 - 151,694 properties sold stc

2019 - 143,504 properties sold stc

2018 - 138,665 properties sold stc

2017 - 134,503 properties sold stc

 

The picture looks similar when we look closer to home in Southampton.

In Southampton (SO14 to SO19), in the first seven weeks up to the 19^th February 2022, 688 properties sold subject to contract.

This year, from the exact 1^st January to the 19^th February timeline, 557 properties have sold stc, which is lower, yet in the same ballpark as 2017, 2018 and 2019.

Yet it is all terrific selling a house (subject to contract); it is still only sold subject to contract, meaning the sale could fall through (as it is not legally binding).

As an agent who likes to delve deeper into statistics, I considered the 'net property sales'. (Net Property Sales being the gross number of properties sold that week less the sale fall throughs in the same week).

In the three months leading up to the Mini-Budget in September 2022, there was an average of 17,801 ‘net property sales’ per week in the UK. That dropped by 34.7% two months after the Autumn Mini-Budget to an average of 11,624 ‘net property sales’ per week in the UK.

 

In the last five weeks, that has rebounded to 17,050

‘net property sales’ per week.

 

And when you consider the average for the same five weeks in 2017/18/19 was 18,330 'net property sales' per week, we are close to what many considered a normal market.

Improving market conditions has been supported by a reduction in average mortgage rates. Homebuyers taking out a five-year fixed-rate mortgage with a 15% deposit can expect a rate of 4.39% (correct at the time of writing with HSBC), down from an average of 6.1% in early October. This reduction in mortgage rates may have contributed to the recent increase in buyer demand.

 

These positive signs in the market have led some experts to suggest that a ‘softer landing’ for the UK property market than initially expected could be on the horizon.

The combination of sellers being more realistic on price and an improving picture of the number of agreed-upon sales suggests a more positive outlook for the property market.

I advise Southampton homeowners coming to market in the upcoming spring season to use their agent's expertise and get the price right the first time to find the right buyer more quickly. If you do wish to chance a higher asking price, only do so for no more than two weeks. If you haven't sold by then, take the agent's advice and realign your asking price.

 

428 Southampton homeowners have realigned their

asking prices since 1^st January 2023.

 

While it's true that some first-time buyers may still be priced out of their original plans and may need to look for a cheaper property, save a bigger deposit, or factor higher monthly mortgage repayments into their budgets, there is still cause for optimism.

There is still a considerable demand for buying property in Southampton - renting is becoming increasingly unattractive for many people as rents are increasing by double digits percentages.

It is important to remember that purchasing a property always involves a trade-off between what one desires and what is affordable, regardless of the market conditions. For example, while a four-bed detached house may be out of reach, a larger and older three-bed semi-detached property may be a more realistic option (and probably have similar square footage).

 

Southampton landlords looking to invest in buy-to-let homes – now may be a good time, as rising rents could offer attractive returns.

 

Of the 1,134 properties let in Southampton since the 1^st January 2023, the average rent achieved has been £1,174 per month. This is a significant drop in the number of properties let in the same first seven weeks of the years of 2017/18/19 and a massive increase in rents.

Finally, the newspapers will be full of news about house price drops in the coming months. All the indexes report house sales where the sale agreed price was offered nine to eleven months ago and completed (i.e., monies and keys handed over) three or four months ago. This peculiar time lag means the house price data is nearly a year old before publication.

So, if you decide to buy a home on that information, you are using old property data. In late 2021/early 2022, there were 30+ viewings per property, and people paid way over the asking price to secure a property. Now there is more 'normality' in the Southampton housing market; today's prices are also more normal (at or slightly below the realistic asking price). So yes, the house price indexes will show a reduction in house prices. The newspapers will say house prices are crashing, yet when it is explained I have above ... whilst it is not a newspaper clickbait title - it is the truth and it’s more of a return to more 'normal house prices'.

 

So, prepare for clickbait newspaper headlines of a house price crash (because ‘bad news sells newspapers’ as the saying goes).

 

Also, prepare for the doom-mongers to quote the bad news of the earnings-to-house prices ratio at one of its highest levels ever.

Earnings-to-house price ratios are a poor measurement of health in the UK property market. Instead, I believe Nationwide's measure of first-time buyer mortgage payments as a percentage of take-home pay is better (as it is actual pound notes out of actual pay packets).

The Nationwide measure of first-time buyer mortgage payments as a percentage of take-home pay has grown for first-time buyers from 30.4% in Q4 2021 to 39.4% in Q4 2022 … a massive rise! Yet mortgage interest rates have dropped since then (so that percentage will fall). Also, to give some context, let us not forget that percentage in 1989 was 48.4%.

Ultimately, Southampton homeowners and landlords should decide, based on their unique circumstances, rather than being swayed by newspaper headlines or general market trends. Anyone uncertain about the property market's future should contact me for my opinion, advice and guidance.

Is your Southampton home bigger than 904 sq ft?

 

Southampton Homeowners - Do you know how big your Southampton home is?

What is the square footage of your Southampton home?

Don’t worry, most of us don't - yet it could be fundamental as Southampton home buyers search for new homes.

 

Us Brits are obsessed with our homes, yet most Southampton homeowners need to learn the square footage (those born after the mid-1970s) or square metre(age) of their homes.

 

As an agent, I find homebuyers usually assess the size of their intended house purchase chiefly by the number of bedrooms the property offers. However, could we all make more effort to calculate how much actual space we require in the home outside the number of bedrooms?

Let me see how the properties locally are split down regarding bedrooms.

The split of bedrooms in Southampton is as follows:

·         20.6% of properties have one bedroom compared to the national average of 10.7%

·         30.2% of properties have two bedrooms compared to the national average of 26.7%

·         36.7% of properties have three bedrooms compared to the national average of 40.6%

·         12.5% of properties have four or more bedrooms compared to the national average of 22.0%

As one would expect for our location in the UK, we have a higher number of 2 and 3-bedroom homes in our locality.

 

So, are more bedrooms better? Not necessarily.

 

Unless you are buying a Southampton property to develop and then sell on straightaway, I believe it is imperative to enjoy your property for what it was designed to be – your home.

Though room for growth and resale ability potential of the house purchase is vital, the manner of the way you and your family live and how you use your home must be the primary consideration for improving your quality of life. And because of this …

 

I have noticed a slight change in how Southampton buyers (and tenants) have been asking and enquiring about property in the last 18 months.

 

The first is asking for a property’s energy efficiency rating. This can be seen on the property’s Energy Performance Certificate (EPC). That was expected, with the rise in gas and electric bills.

Yet the second is that more and more Southampton tenants and buyers are asking about the size of the property, which can be found in the EPC mentioned above.

Talk in the property industry suggests a move towards home movers wanting homes with minimum square footage instead of a property with a particular number of bedrooms.

 

I am noticing mature Southampton homeowners who are downsizing are asking for the size of a property, as they require fewer yet larger rooms.

 

Should we all consider how we use our space in our Southampton homes before we decide to move? Before we do, let’s look at the average sizes of the properties locally.

These are the averages for the Southampton area.

·         The average size of a house is 1,065 sq. ft. compared to the national average of 1,103 sq. ft.

·         The average size of a bungalow is 818 sq. ft. compared to the national average of 862 sq. ft.

·         The average size of a flat/apartment is 398 sq. ft. compared to the national average of 464 sq. ft.

·         The average size of a maisonette is 538 sq. ft compared to the national average of 657 sq. ft.

·         The overall average is 904 sq. ft. compared to the national average of 994 sq. ft.

 

Again, as I would expect due to our location, the average home is smaller than the national average.

In the last few years, with lockdowns, as a nation, we have started to use our homes differently.

Rooms in our homes have become interchangeable - having more bedrooms isn't automatically the status symbol it once probably was.

Spare bedrooms have become offices, dining rooms have become gyms, and so on.

Are you willing to sacrifice living room space for an extra bedroom, even if it makes the living room feel cramped and uncomfortable?

 

Before selecting a home based solely on the number of bedrooms it offers, there are several factors to consider.

 

Evaluate your current living space and how you use it.

 

Determine if you utilise all the rooms to the best of the space available, if you have enough storage, and if the layout works for you. If you value space and openness, prioritise square footage instead of bedrooms.

Consider your current life stage and living space needs. If you have a family, bedrooms may be a priority, but assessing how many are needed is essential. It would help if you also considered whether you need a separate space for work or a top-of-the-range ensuite.

 

If you plan to rent out your Southampton property, the number

of bedrooms is crucial.

 

However, it is essential to consider the type of Southampton tenant you want to attract and what type of space would be most marketable.

Instead of moving to a new Southampton home, renovating your current space might be a better option?

By reconfiguring the space or extending it, you could improve your quality of life or increase the value of your Southampton property. A home makeover could give you the open space or environment you desire?

By answering these questions, you can determine whether the number of bedrooms, other rooms, or square footage is the most crucial factor when selecting a new home.

What do you think?

Before I go, if you are a Southampton homeowner or property buyer and you want to pick my brains on your best options, please don't hesitate to pick up the phone or drop me a line and we can start a discussion without any obligation or cost.

50% of Southampton house sellers in 2022 had only been in their old home on average 4 years and 33 weeks

 

The share of Brits moving each year has been declining since the late 1980s (when at one stage, people moved every eight years), yet since the pandemic's beginning, something has appeared to upset that trend.

Newspaper stories and social media posts painted a picture of homeowners moving from the city centres to its suburbs, from the suburbs to the towns and countryside around the UK. Areas like the Cotswolds and coastal towns around the country got swamped by the 'race for space', significantly affecting housing markets (including Southampton).

But how many Brits moved? And how long had they been in their homes before they moved?

In Great Britain, there are 28.3 million households, of which 19.3 million are owner-occupied and 4.43m owned by private buy-to-let landlords.

 

There is £7,035 trillion of residential property in private hands.

Eight years before the initial lockdown in 2020, an average of 79,646 properties were sold each month in the UK, meaning just under a million UK households move home annually.

 

Therefore, in those 8 years, the average British homeowner moved every 20 years and 4 months.

So, what uplift was there in people moving home after the first lockdown in 2020?

In 2021 and early 2022, an average of 102,021 people moved home monthly, taking the average move time to once every 16 years. So even though there was an uplift in people moving home, it was nothing like the 1980s.

It shows that in the 21^st Century, once you have succeeded in buying a property you can call home, there isn't much enthusiasm to move again.

 

What is happening in the Southampton property market now?

We love our homes in Southampton, but most of us (including myself) still want to 'better our lives' with a larger house, better area etc., which typically requires us to climb up the Southampton property ladder.

 

Yet, with Southampton house prices having risen by 378.1% in the last 25 years, the cost of going up the next rung on the Southampton property ladder has become prohibitive.

Everyone remembers back to the 1980s, when we had an upbeat booming property market as a backdrop, and British homeowners moved home every eight years; so now, with the average move time in the mid to late teens (in years), this equates to each homeowner only moving around three to four times in their adult lifetime.

Or could it be something else?

 

We all know the phrase, “lies, damn lies and statistics".

The home moving statistics above hide some great details about the British property market.

When British homeowners get into their 50s, 60s and beyond, their inclination to move home drops like the proverbial stone.

The average time a homeowner without a mortgage moves home is 24 years and 27 weeks (and just over 7 out of 10 outright homeowners, i.e. without a mortgage, are 65 or older). 

Homeowners with a mortgage tend to be younger to middle-aged.

 

Homeowners with a mortgage move on average every 10 years and 11 weeks.

So, whilst I cannot determine which house seller has a mortgage and which doesn't, I can look at how quickly people move home in Southampton. 

Therefore, I have taken a look at the last 50 property sales in Southampton and found some interesting results.

 

The average Southampton homeowner had only been in their home on average 12 years and 9 weeks before they sold.

 

Yet the devil is in the detail.

There appears to be a two-speed Southampton property market …

 

50% of Southampton house sellers in 2022 had only been in their old home on average 4 years and 33 weeks.

 

Then, let's split the findings into quarters.

·      

When looking at the properties that fall into the slower time bands (i.e., the ones that don’t move/sell so often), they tend to be the larger properties where the homeowners have lived often for 30 or 40 years.

Maybe, the one lesson from these statistics is that once homeowners get into their 60’s and 70’s, their tendency and inclination to move home declines significantly.

This means the homes on the lower rungs of the Southampton property ladder are selling quickly (as younger aged homeowners occupy them) ... yet once Southampton people tend to get older, their tendency to move diminishes.

This obstructs the younger generation of Southampton homeowners from wanting to buy the bigger Southampton properties these mature Southampton homeowners live in.

What is holding the older generation back from selling and downsizing to free up family homes for families that desperately need them? Some will be apathy, and some will be wanting to hold on to the homes they brought their families up in, yet the bottom line is …

 

as a country, we must reconsider how we can encourage (not force) older homeowners to sell their large homes to release them to the younger families that desperately need them.

Some recent articles I have written suggested tax breaks, yet the government doesn't have the money to give massive tax breaks.

One thing I do know we, as a country, have seen (and will continue to see) a lot of demographic change together with an increasingly ageing population, so it’s not just about how many households we build but whether we are constructing the right kind of homes for the older generation?

Thought-provoking times are ahead for the Southampton property market!

If you have a Southampton property to sell in the coming months or years and want to know how this and other factors will affect you and your property ... without obligation, don't hesitate to call me.

Is Buy-to-Let in Southampton Still Worth the Risk?

Over the last five years, life has become a little trickier for Southampton landlords, with changes to their taxation status, mortgage interest relief and an additional 3% stamp duty for a buy-to-let property, and has made lots of Southampton landlords ask themselves:

‘Is buy-to-let in Southampton still worth the risk?’

Regarding taxation, in 2016, the Government added a 3% supplement in stamp duty on all buy-to-let properties. Then, in 2017, the Government started to reduce mortgage interest by stopping landlords from deducting the interest they paid on their mortgage before paying tax on the rental profits and replacing it with a flat rate tax credit based on 20% of the interest they spent on their mortgage.

There would be no effect if a Southampton landlord were a basic rate 20% taxpayer. Yet Southampton landlords who were higher-rate (40%) or top-rate taxpayers (45%) saw an effect as their tax relief was cut in half.

So, is buy-to-let in Southampton still an advisable investment?

The response to this question is much more significant than the issue of taxation.

To a large degree, as with all investments, it depends on why you are investing and what your final objective is. Let me expand.

The rewards of Southampton buy-to-let.

You can earn money two ways with buy-to-let. The first is the rental income from the property.

The average rent achieved in Southampton is £1,294 pcm,

a rise of 9.8% in the last 12 months.

 

This rent is expressed as a yield and is described as a percentage figure that's calculated using the annual rental income and dividing it by the value of the buy-to-let property.

 

Landlords and buy-to-let investors use rental yield to judge and measure the value of their rental investments and portfolios. E.g. rent is £1,000 per calendar month (pcm), which means the annual rent is 12 x £1,000 = £12,000. If the property is worth £180,000, the rental yield is £12,000 divided by £180,000, which, when expressed as a yield percentage, is 6.67%.

 

The average yield in Southampton is 6.1%.

Some areas in Southampton can easily achieve a 7.6% to 9.0% yield, sometimes even more, depending on your choice of property and type of tenancy you wish to have.

If yield is your number one focus, the highest average yield in the UK can be found in Bradford City Centre, where it is 12%, Hyson Green and Radford in Nottingham at 9.6% and Pontypridd at 8.7%, while other areas in the UK can be as low as 2.2%.

So indeed, is the best strategy to go for high-yielding properties?

The problem with pursuing high-yielding Southampton buy-to-let properties is that you usually must compromise on the property’s capital growth to attain that high yield.

The second way to earn money with buy-to-let is capital growth as your Southampton property increases in value.

 

SO15 property values are 15% higher than 3 years ago.

 

A reasonable return in anyone's books.

Of course, this all depends on the rent coming in, yet you can buy landlord insurance to cover against loss of rental income, tenant damage and legal costs.

Interestingly, using Government data and Industry data, Denton House Research found that in the first lockdown landlords who managed their rental properties themselves were 272.5% more likely to be in arrears of 2 months or more (compared to those who utilised the services of a letting agent to manage their property).

 

The drawbacks of Southampton buy-to-let.

 

Your tax bill is higher today than a few years ago, but isn't everyone’s?

If Southampton property prices fall, the capital you invested will reduce, yet if it sat in the bank, it would decline in value anyway.

Being a landlord is a big responsibility, with over 170 pieces of legislation and orders to comply with. That's where a suitable letting agent can help you with your rental property to ensure you remain compliant.

I recommend Southampton landlords consider all options to maximise their rental income whilst reducing their outgoings concerning their rental property.

Rents are rising in Southampton (as mentioned above), and many Southampton landlords appreciate the demand-led increases in their rent. And let me ask you, why shouldn’t they, as they have been exposed to many legislative and taxation changes over the last five years?

Ok, last point and the elephant in the room.

Will there be a house price crash, and should Southampton landlords wait for it?

A house price crash conjures up a big event that makes house prices go down, and it certainly happened like that in 1988 with the removal of dual-MIRAS tax relief on mortgages and the Credit Crunch in 2008. Yet this time, it’s different.

As there is more normality and balance in the Southampton property market at the moment (compared to 2021/early 2022), the price that is being paid today on most houses in Southampton is not as extreme or as extravagant as what was being paid in 2021/early2022 (when people were outbidding each other).

Therefore, if you were to look at the house price indexes going into the spring and summer of 2023, then there will be a reduction. The doom-mongers and newspaper editors will call that a house price crash, yet I see it as the market easing back to normality.

 

A massive driver behind landlords and home buyers ‘waiting for a house price crash’ is that they fear they have ‘missed the boat’ when it comes to buying/investing.

 

There is always newspaper (and now social media) attention when house prices explode. This means people quickly feel pressure to enter the 'property market', as everyone is making money, yet they aren't.

The problem is that during the previous boom phases (the late 1980s and early/mid-2000s), house prices increased quicker than some people could save money for their deposit (for a house purchase). They saw their friends and acquaintances snapping up buy-to-let deals and they were missing out on the spoils of house price growth. As a result, many of these excluded house buyers judged that a house price correction was foreseeable, inevitable, and sometimes even needed. Not with any rational economic argument, but classic FOMO (Fear of Missing Out).  

Yet a ‘house price crash’ isn’t the silver bullet that many think it will be.

‘House price crashes’ virtually never drop house prices to reasonable levels, and in fact, they have a lot of additional effects that make house buying even harder.

Investing in buy-to-let is a long-term investment. Remember what I said at the start. It would help if you decided why you're getting into buy-to-let investment and when you will get out (and what you want to get out of it). Buy-to-let has advantages and disadvantages, but it is something tangible and something that investors can understand.

 

The UK needs to build more houses, so the demand for rental properties will only continue to grow.

 

The heady days of the early 2000s, when anybody could make money from any property, though, have gone. With increased legislation and taxation, you need the advice of a great agent to guide you on what to buy (and not to buy) for an excellent yield, incredible capital growth or a balance of the two. That agent should be able to find you a great tenant who will pay the rent on time and look after the property to ensure that when they leave, your investment is returned to you in the best condition possible.

If you would like to pick my brain, whether you are considering becoming a landlord in Southampton, an existing landlord (irrespective of which agent you use) or even a self-managed landlord, do not hesitate to pick up the phone to me.

I will tell you what you need to hear, not necessarily what you want to hear.

 

Southampton Property Market Update: February 2023

 

·       With the Bank of England raising interest rates and inflation high, what is happening in the Southampton property market?

 

·       Are properties selling in Southampton? And if so, what is selling?

 

·       What will happen to the value of your Southampton home?

 

·       Read the article to find out what is happening to the Southampton property market.

 

As we enter February, the Southampton (and British) property market is full of mixed messages.

Whilst the Bank of England increased the base rate nine times in 2022, meaning they are now at 3.5% (3% higher than 12 months ago), mortgage rates are now dropping.

The Southampton property market rocketed over the last few years because of the imbalance of the number of properties for sale versus the demand, with many more people looking to move home than there were properties available.

Now, as we are over the first month of 2023, we are experiencing a steadier Southampton housing market, where homebuyers have the time and opportunity to ensure they find the right home for them.

The days of 50 viewers per property on the first weekend of marketing, frenzied Southampton buyers outbidding each other by increasing their offers by tens of thousands of pounds over the asking price has become the exception and not the norm.

 

I often get asked my thoughts on the Southampton property market (hence these blog articles) and at this time of year, I get asked my forecast for the year ahead.

 

The one big thing I have noticed is the imbalance of what is coming on the market for sale versus what is selling.

For example, 38.2% of properties that came on the market nationally in November and December 2022 had an asking price of £250,000 or less, yet 45.6% of the properties sold subject to contract since 1^st January 2023 have been £250,000 or less.

 

That doesn't sound like a lot, yet it makes a massive difference to the property market. 

However, it’s very easy to look at national averages, regional averages and, of course, Southampton averages. Yet the property market is just one market nationally, as there isn't just one Southampton property market.

However, the same pattern is seen in the higher-priced Southampton properties. These higher-priced properties are selling more slowly than the lower-priced Southampton properties. Therefore, the need for those larger Southampton properties to be more realistic in price is paramount to stand out from the crowd, especially with the next point.

Evidence suggests there is a growth of Southampton buyers, who are looking to find a home before putting theirs onto the market. This was unthinkable last year, yet as the Southampton property market returns to normality, this will be seen more and more.

What are my thoughts?

Firstly, the time scale of how long it will take to sell a Southampton home.

I expect to see the time it takes to sell a Southampton home increase from 43 days in 2022 to a more 'normal' housing market of around 65 days.

Secondly, the imbalance of the Southampton property market.

A greater number of larger homes in Southampton are coming on the market because (as mentioned recently in a previous blog post) of the higher number of mature homeowners looking to downsize. This is because these larger homes have become much more expensive to heat, and as many of the occupants are on fixed incomes with their pensions, they are downsizing to cut costs.

Thirdly, that brings me to talk about energy efficiency.

Many buyers have started to ask about a property's Energy Performance Certificate (EPC) rating. I recommend to Southampton homeowners considering moving in the spring or summer to have an EPC done on their property now, as there may be points that could easily be rectified and improved from one EPC rating band to another.

This would mean you will get a lot more interest and a better price for your property. If you need any help or guidance in organising an EPC on your Southampton property (even if you are not selling for six/twelve months), do not hesitate to me give me a call.

So, what is happening in the Southampton property market in terms of new properties (aka new listings) and what is selling?

 

326 properties have sold (STC) in the Southampton area since 1^st January 2023.

(Southampton being SO14 to SO19).

However, it's essential to look at what is selling in Southampton, and the most active price range is the £250k to £300k range, where 71 properties have been sold subject to contract (representing 21.7% of sales).

Looking at what is coming onto the market in the same time frame …

350 properties have come onto the market in the Southampton area since 1^st January 2023.

Interestingly, the price range with the most listings is the £250k to £300k range.

This means Southampton is bucking the national trend (mentioned above) where nationally, the lower to middle property market is where the sales are, but the properties coming onto the market are slightly higher in price, yet it’s the same in Southampton.

Any Southampton homeowners with properties in price ranges that aren’t selling so well need to be ‘on point’ to stand out from the crowd regarding their marketing, be spot on regarding their pricing (compared to the growing competition of other larger homes for sale) and now more than ever, their EPC rating (especially if they are on the cusp between two EPC bands).

Before I conclude, you might wonder why I have not mentioned Southampton house prices.

Well, what will happen to Southampton house prices in 2023 is something I am not sure of.

(Yes, I know that level of frankness is strange coming from an estate/letting agent).

I know the prices being achieved for homes in Southampton in the spring of 2022 (when everyone was out bidding each other) are not being achieved today. It all depends how you look at it.

Are Southampton house prices dropping or are they just returning to normal? I would say the latter.

However, looking at house prices as a ‘bellwether’ for the health of the Southampton property market has flaws.  

Many economists and property market commentators believe transaction numbers (the number of properties sold) give a more accurate and truthful indicator of the property market's health than just house values alone.

The reason is three-fold.

Firstly, most people also buy a home when they sell their own, so if Southampton property values drop by 10% or rise by 10% on the one you are selling, it will do the same on the one you are buying - meaning to judge the health of a property market on house prices is very one dimensional.  

Secondly, as most people move up market when they do move home, if the price of the one they’re selling might not be as much as they would've achieved in 2022 (if they drop), the price that they will pay on the one they want to buy will be lower. Thus, it will cost them less to move upmarket!

E.g. Last year, your Southampton home was worth £400,000, and the one you wanted to buy would have been £750,000. Let’s say Southampton house prices did drop 10% in 2023 (which I don’t know if they will); your home would be only worth £360,000. Yet the one you want to buy would now be worth £675,000. So last year, it would have cost £350k to move, but if Southampton house prices drop 10%, the move would cost £315k, saving you £35,000.

Third and finally, moving home is a human thing. Property habitually delivers a robust emotional connection with homeowners - a connection that few would attribute to their other investments like their stock market investments or building society savings passbook.  

Moving home could be described as a human journey, moving from one chapter of one’s life to another.  

Therefore, when people do move home, it shows they are moving forward in their lives, which gives a great indicator of the property market's health.

 

It’s going to be an interesting year for the 2023 Southampton property market.

My opinion. Do what is suitable for you, your family and your finances.

Ignore the newspapers and look at the facts in hand and if you want a frank chat about the Southampton property market, irrespective of whether you want to sell or not, call me. I might not tell you what you want to hear, but I will tell you what you need to hear