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Why Invest in THE SOUTH COAST? most traditional and strongest industries.
This section of the South Coast, which extends from Swanage to the Solent, is one of considerable diversity, and it offers opportunities for property
In addition, however, Southampton and Portsmouth
investors with a variety of interests.
are economic powerhouses that are seeing billions of pounds of investment, and poised to create literally
Quite obviously, it encompasses some of the country’s
thousands of new jobs. Moreover, their universities
best known tourist destinations. There’s Swanage
are attracting millions more and sustaining countless
itself, of course, as well as Bournemouth, the New
jobs. Here, then, is potential for investment not just in
Forest, the sailing mecca of Lymington, and a host of
short-stay holiday lets but in residential property and
smaller ports and villages. Holidaymakers typically
student accommodation.
descend here in their thousands, injecting many millions into the local economy. For investors, the
With such a range of attractions on offer, one of the
country’s gradual re-emergence from the Covid
first challenges is deciding where to focus.
pandemic promises steady growth in one of the area’s
KEY POINTS TO CONSIDER
Traditional strengths
A focus for high value
Home to major
Two of Britain’s
Home to popular
in tourism – a fast-
industries, including
employers such as
busiest port cities
and successful
recovering sector.
defence.
BAE Systems.
universities
£ Billions being
Thousands of new
invested into urban
jobs forecast
A growing population
An ageing population,
Strong rental
creating more need
demand in many
regeneration and
for retirement
locations
infrastructure
properties 5
The South Coast offers stability, capital growth and opportunity. Residential Estates
KEY INVESTMENT LOCATIONS The subject of this guide is an area that extends from eastern Dorset to Hampshire and, as such, it contains a host of villages, towns and cities, often with very different characteristics and appeals. It’s beyond the scope of this guide to give detailed information about each separate community, partly because they are so numerous. Many of them are little pockets and clusters of property along the coast or small rural villages dotted around the New Forest. Others include well-known resorts such as Swanage 6
and Bournemouth. In many of these, tourism is the predominant industry, and in property terms, that can take the form of anything from large hotels to serviced apartments or spare rooms and outbuildings let via platforms such as Airbnb. When it comes to tourist property investment, there is certainly no shortage of options, but each location must be studied on its own merits, taking into account variables such as local prices, rental competition and – perhaps most significantly at present – the speed with which the area is likely to recover from lockdown restrictions. That’s quite a mix of considerations and we won’t attempt a village-by-village examination. Instead, we’ll focus on the region’s biggest towns
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and cities: Bournemouth, Portsmouth and perhaps most notably Southampton, where large-scale developments and investment are re-shaping the local property market.
From touriSm, to business & education, the south coast has much to offer investors.
BOURNEMOUTH
SOUTHAMPTON PORTSMOUTH 7
BOURNEMOUTH: AN OVERVIEW At the time of the 2011 Census, Bournemouth had a population of 183,491, but it is part of the wider South East Dorset conurbation, which has a population of 465,000. It is a well-known tourist resort and, like many others, it saw its visitor economy contract in 2020 as a result of the Covid-19 pandemic. However, thanks to the success of the NHS vaccine programme and the growing popularity of UKbased ‘staycations’, that market is set to rebound strongly. In the meantime, it has a number of other economic strengths that are helping to sustain its fortunes. 8
KEY SECTORS The most important sector in the town is that of financial services. The local council notes that “the banking, finance and insurance sector is the most valuable to Bournemouth’s economy in terms of GDP,” and it lists important local employers such as JP Morgan, RIAS, McCarthy & Stone and Liverpool Victoria. Another growth sector is the creative and digital sector. In 2015, Bournemouth was reported to be the fastest growing location in the UK for tech jobs, and
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REGENERATION & INWARD INVESTMENT In March 2021, Chancellor Rishi Sunak confirmed that the town would be one of 45 towns to receive funding via the £1 billion Town Deal fund. It secured £21.7 million to support the regeneration of its Boscombe waterfront district. Amongst other measures, it will fund the replacement of a local shopping centre, new commercial units, improved digital connectivity, and a public square that will be used as a venue for major events. The money will be used in conjunction with £98.4 million of Local Growth funding secured by Dorset LEP.
USEFUL DATA: ECONOMY VALUE
£12 BILLION
AVERAGE PROPERTY VALUE AVERAGE PRICE GAIN AVERAGE YIELDS
£337,042
12.29%
YEARON-YEAR
Source: Zoopla, April 2021
Source: Zoopla, April 2021
BETWEEN 3.6% & 5.5% BY POSTCODE
Source: Liveyield
the council notes that the area is now home to more than 400 digital agencies. The service sector more generally has also grown. Since 1991, the town has experienced more than 25% growth in its public administration, education and health sectors, which support nearly 41,000 local jobs. These and other resilient, future-focused industries all contribute to a £12 billion economy, and help to support a relatively skilled and affluent population. Average earnings in the town are reportedly in the top 50% of urban centres in Britain. 9
PORTSMOUTH: AN OVERVIEW
KEY SECTORS
The city of Portsmouth lies around 35 miles (57km)
Systems Surface Ships, and to the Naval Dockyards. It
east of Bournemouth. Part of Hampshire and centred upon Portsea Island, it overlooks the Solent and the Isle of Wight. Its urban population is around 209,000 but the wider metropolitan areas is home to over 542,000 inhabitants, making it one of Europe’s most densely populated cities. It’s also one of the country’s most productive cities, ranking in the UK top 20 for GDP per worker. Much of this is due to a keen focus on high-value industries such as defence and advanced manufacturing. This strength was recently recognised by the Centre for Cities, whose 2021 Cities Outlook report ranked Portsmouth in the UK top 20 for economic resilience. Invest Portsmouth writes that the city is “one of the 17 strongest economies least affected by Covid… (and is) listed as 16th least affected by Covid-related unemployment.” 10
An historic port city and one of the UK’s biggest naval bases, Portsmouth has an economy that has always been strongly associated with the sea. Today, continuing that tradition, it is home to large tier-1 employers such as BAE is also served by Portsmouth International Port, which supports freight and passenger routes to Europe and will typically handle over two million passengers per annum. Like most cities, Portsmouth felt the effects of the lockdown but it has proved far more resilient than most. Its defence industry connections and its status as a key trading port helped to insulate it against the worst effects of the pandemic as Portsmouth Council observes: “There is significant GVA growth despite the economic downturn, which is in part due to the global nature of a number of the city’s companies. This is symbolised by the satellite payloads manufactured by EADS Astrium and the ships constructed by BAE Systems for international customers.”
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OTHER MAJOR EMPLOYERS INCLUDE:
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Regeneration & Inward Investment Keen to maintain the city’s economic momentum, public and private investors have been fuelling some important and ambitious projects. The council reports that Portsmouth is “undergoing a major transformation, with over a billion pounds being invested in or committed to its infrastructure, amenities and new commercial developments.” More generally, the city has investment plans totalling around £2 billion, and it is benefiting from £831 million of City Deal investment funding. Some of the most important development sites include: Portsmouth City Centre The regeneration of the central district is expected to support the creation of 9,700 new jobs. Tipner West / Lennox Point A new marine employment hub designed to facilitate growth in shipbuilding and forecast to generate over 2,000 new jobs. Dunsbury Park A new commercial and industrial site with 665,000ft2 of development space and plans for a new hotel and conference centre. Business Hampshire notes that the scheme “will create hundreds of new local engineering and manufacturing jobs.” Southsea Coastal Scheme Described as the UK’s largest local authority-led coastal defences project, this scheme is valued at over £100 million and will sustain hundreds of construction sector jobs. 12
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ECONOMIC IMPACT
Portsmouth International Port A 2017 study estimated the economic value to the city. Key findings included: Total economic contribution: Local economic impact: Multiplier effect: Employment:
£390 million
£189 million
£0.4m of indirect benefits for every £1m generated
5,590 jobs
The University of Portsmouth A study in 2016 set out to quantify the university’s economic contribution to the city, key findings included: Total economic contribution:
£1.1 billion
Regional contribution:
£624 million (Solent) / £476 million (Portsmouth)
Contribution to tourism:
£5.5 million / 230 jobs
Employment:
9,300 jobs, of which 7,900 jobs in Portsmouth
Student spending:
£209.5 million
Foreign student value:
£64 million
University Estate Masterplan: £400 million
USEFUL DATA: ECONOMY VALUE
£13.7 BILLION
AVERAGE PROPERTY VALUE
£252,635
AVERAGE PRICE GAIN AVERAGE YIELDS
+8%
YEARON-YEAR
Source: Zoopla, April 2021
Source: Zoopla, April 2021
BETWEEN 4.0% & 6.1% BY POSTCODE
POPUL ATION
209,000
POPULATION GROWTH FORECAST BUSINESS POPULATION EMPLOYED JOBS TOURSIT VISITORS STUDENT POPULATION
Source: Liveyield
Source: Liveyield
+13,300
6,779
Source: Hampshire CC
Source: Invest Portsmouth
99,600 9.3 MILLION
Typical Figures
24,000 13
Southampton: AN OVERVIEW Supporting a resident population of 239,400, the
Towards the end of 2019, Business Hampshire noted that “Southampton’s economy is predicted to grow by 18.5% over the next decade with employment levels expected to rise by 10%.” The pandemic will have eroded some of that potential but the underlying trend still looks to be set firmly upward.
Hampshire city of Southampton is another economic powerhouse. In 2019, the Centre for Economic &
Like its neighbours, Southampton has underlying
Business Research (CEBR) published a report stating that
strengths across a variety of sectors, and it is driving
Southampton’s economy had been performing better
economic expansion with an ambitious programme of
than any other city on the South Coast. Significantly,
regeneration and inward investment. It’s also poised to see
neighboring Portsmouth was another that was ranked in
its population expand markedly in the coming years –
the UK top 10.
a function of organic growth plus the inward migration of new employees and their families.
The Covid pandemic presented a challenge, just as it did everywhere else, but Southampton has remained
For all these reasons, Southampton has a manifold appeal
strong. In 2021, the PwC Good Growth for Cities report put
to property investors, which is why we’ll be devoting
Southampton in its UK top five for growth, showing a GVA
special attention to it in the following sections.
growth rate of 5.1%. Importantly, the city has maintained its top 5 ranking since 2017, so it is a reliably strong performer. The PwC data indicates that it is also one of the cities least impacted by the pandemic.
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KEY SECTORS The city itself has an economy valued at around £7.7 billion, although the figure for the surrounding region will be considerably larger. Southampton City Council’s Economic Assessment for 2021 notes that the city achieved healthy economic growth in all but two years since 1998, and that since 2017, it has outperformed the wider South East by a healthy margin (2.8% vs 2.3%.) GVA per head has also remained above the UK average: £30,419 in 2018, as compared to the national mean of £29,356. The council also reports that the business population in Southampton rose by 18.5% in the year to March 2020, an exceptional rate of expansion that brought the number of active enterprises to 8,310. Over the last 4 years, much of this success has been owed to a number of key industries. Their share of the local economy is shown in the following pie chart.
Transport / Storage
21%
Financial / insurance
12%
Health / Social
11%
Real Estate
9%
Professional / Scientific / Tech
7%
Education
7%
Wholesale / Retail
5% 15
KEY SECTORS Significantly, many of these key sectors are also the ones that have been showing the strongest growth. Financial / Insurance
+£177m
Health / Social
+£73m
Services (other)
+£36m
Transport / Storage
+£28m
Real Estate
+£22m
Construction
+£18m
Arts / Recreation
+£11m
The largest sectors by job numbers include: Health
23,000
Education
13,000
Retail
11,000
Business administration
11,000
Transport / Storage
8,000
Accommodation / Hospitality
8,000
Professional / Scientific / Tech 7,000
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Regeneration & Inward Investment At both the city and county levels, considerable investments are being made in economic regeneration and laying the foundations for growth. Some are part of the £3bn City Centre Masterplan, which was launched in 2012, while others are completely new
Transforming Cities Fund In the 2020 Budget, the Chancellor of the Exchequer announced that the Southampton City Region would be awarded £57 million in funding towards the city’s £68.5
and independent.
million programme for developing new sustainable
The following are just some of the most notable
March 2023.
transport infrastructure. The funding will continue until
examples:
More generally, at the regional level, even more is being
• Over £100 million for city transport projects
Green Growth Strategy to 2030, the city council reports
• £70 million on River Itchen Flood Defences • £250 million development at Leisureworld (expected to create 1,000 jobs)
invested in sustainable transport. In its Economic & that “Alongside the TCF programme, other programmes mean there is over £77 million being invested in active and sustainable transport investment by 2023 in the city
• £4.5 million from Solent LEP to support the launch of a
region.”
new Cancer Immunology Centre at the
The Mayflower Quarter
University Hospital • £4.1 million for Go! Southampton’s Green Transport
2020 saw a flurry of news articles announcing progress
Recovery Plan
on this 84-hectare development project, which could
• £500,000 – Delivering the Future of Work & Intelligent
give rise to an estimated £1 billion of investment and countless new jobs. Invest Portsmouth writes: “The area is one of the largest city centre regeneration opportunities in the UK, extending from Southampton train station to the waterfront. The plans to transform this key area in the city centre are truly ambitious. Providing world class facilities for business, homes, retail and leisure, the mixed-use re-development will also re-connect an area of prime waterfront with the city centre.” 17
Southampton Airport Economic Gateway This new development and distribution site makes good use of its excellent air, rail and road connections. Business Hampshire reports that it “offers a unique opportunity to develop land adjacent to Southampton Airport and its neighbouring train stations,” and that the site comprises of 5 parcels of land: • Barton Park • Tower Lane • Railway Works • Land at Chickenhall Lane • Land at Southampton Airport The mixed-use development is expected to see the construction of premises for uses including “offices and retail premises, a hotel/conference centre, leisure, restaurants, residential and community-related development.” The plans are in their early stages and specific time-frames have not yet been set, but with nearly 132,000m2 of floorspace set to be created, the potential for new employment is immense. 18
solent freeport Many of the above schemes, while important and transformative in their own rights, pale in comparison to the scale of the proposed new Solent Freeport development. Given the go-ahead in March 2021, the Freeport would build on the region’s status as a nexus for international sea freight. Solent LEP estimates that “Freeport status would help create more than 50,000 jobs and attract £2 billion in extra investment.” Not all of that would be restricted to Southampton, but it would certainly have a profound effect on local employment, business prospects and living standards – all of which would be welcome news for property investors. In a newspaper report in March, Solent LEP estimated that around half of the new jobs – approximately 25,000 – would be created in Southampton.
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Population Growth Projections In the face of so much local investment and regeneration, it’s small wonder that Southampton Council expects employment and the size of the population to rise steadily in the coming years. Part of this will be the result of new workers taking jobs in the area, but much will be the result of natural changes in the local population. On its Southampton Data Observatory website, the council writes: “Southampton’s total resident population will increase to 273,020 people by 2025, a rise of 6.5% (+16,561 people) from 2018.” It quotes ONS data showing that Southampton’s resident population increased by 23.5% between 1991 and 2018, and notes that the population is likely to keep on rising, thanks partly to the fact that the population is ageing and living longer.
The Impacts of an Ageing Population The local council reports that “the older population is projected to grow proportionately more than any other group in Southampton in the next few years… The over 65 population is set to increase by 16% between 2018 and 2025, with the over 75 population set to increase by nearly 25%.” The presence of an ageing population has important consequences for investors. It means fewer properties becoming available on the market for younger people, which could intensify competition amongst buyers and, thus, drive capital values higher. It could also tend to boost demand for sheltered accommodation and smaller apartments for ‘downsizers,’ thereby boosting rental prospects within these reliable niche markets. In the longer term, pressure on the housing market may well intensify. The general population is expected to grow 12.3% by 2041, which equates to an increase of 30,800 residents.
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The student population The city has two universities: the University of Southampton, and Southampton Solent University. Together, these support a large student body that has a significant effect on the local property market. The Southampton Economic Assessment 2021 notes that in 2019/20 “there were 33,175 higher education students in Southampton, with 68% of these studying at the University of Southampton.” It also records that, overall, student numbers rose by 1.7% year-on-year, but the fastest growth was in the number of postgraduate students, which rose by 14.9%. For investors, the bottom line is that the population is rising and that will inevitably add to demand for housing, both in the mainstream market, and in the retirement and student sectors. In a city witnessing a distinct under-supply of housing, that’s a recipe for steadily rising rental and capital values.
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southampton tourism
The leisure marine sector in the south east is the second largest in the UK, worth £800 million and supporting 8,500 jobs with most of it concentrated in the Solent area.” According to figures published in 2020 by Hampshire
Another source of demand for property is the tourism
County Council, tourism supports 89,000 jobs and
market, which is big business in Southampton. The
contributes 33.3 billion to the Portsmouth and
city is a popular haunt amongst British holidaymakers
Southampton economies.
but it also attracts large numbers of overseas visitors via its international airport and Europe’s busiest cruise
This is important for two reasons. First, it’s a sector
port, which handles over 1.6 million passengers every
that helps to sustain and energise local commerce and
year.
associated economic activity. The consequences of that include more secure jobs, more residents earning
Solent Local Enterprise Partnership observes that
a living wage, and more money circulating in the local
“The visitor economy in the Solent area is worth over
economy.
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There is a strong correlation between average disposable incomes and average property prices, so anything that promotes the city’s prosperity is also likely to benefit investors over the longer term. The second reason is also the more obvious. Visitors are a significant source of seasonal rental demand, and the market for short-stay furnished lets and serviced apartments can be very rewarding. With the Covid vaccine programme now rolling out quickly and in the face of growing consumer confidence in the British ‘staycation’, investors can expect tourist-related rental demand to grow steadily in the coming years.
Development Plans Southampton Connect’s City Strategy to 2025 recognises the importance of the visitor economy. It notes that the city attracts 7 million day visits a year, but local partners are keen to do more. Stakeholders have been committing £3 billion of investment to the City Centre Master Plan, which is expected to generate 7,000 jobs by 2026.
UK City of Culture 2025 Southampton is bidding to become the UK City of Culture for 2025. The city council notes that if it’s successful, the city “can expect an increase in tourism, as well as a boost in investment throughout the city… When Hull was UK City of Culture in 2017 it added £300 million to their tourism market and up to £17 million gross value added to their local economy. 23
Southampton’s Housing Market As a busy city with a rising population and growing prospects for large-scale job-creation, Southampton was almost bound to see a pronounced imbalance between housing supply and demand. Currently, demand is very high and, as in many other UK towns and cities, supply is failing to keep up. In its Tenancy Strategy 2020 – 2025, Southampton City Council concedes “that there is far more demand for social housing than current supply can meet, and that social housing providers in the city will look to a range of housing options in response to this.” For many tenants, the private rental sector will be the only viable solution, so investors can expect strong, resilient demand, which should be a feature of the market for many years. Moreover, with such significant growth expected in both employment and the population, the gulf between demand and availability may yet widen. It’s true that local planners have given the green light to a number of new house-building projects but these are unlikely to be enough to close the gap. What’s more, given the difficulties that many first-time buyers experience when trying to get onto the property ladder, rental may still be the only choice for many.
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Average Values At the end of April 2021, Zoopla estimated the average property price in Southampton to be £315,034, and found that values had risen, year-on-year, by 9.38%. Looking ahead, the robustness of the housing market suggests that investment in bricks and mortar will remain a safe bet for years. In its 5-year residential forecast, for example, Savills predicts that by 2025, the average house price will have risen by 17% in the South East, and by 18.7% in the South West.
Average rental yields According to April 2021 data from LiveYield, average yields across Southampton varied by postcode, between 4.9% and 5.6%.
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Property Market Predictions for 2021 and Beyond For property investors, the appeal of Southampton is closely tied to its rising economic fortunes, and all the key indicators point to a strong and rewarding market. The economy is resilient – one of the UK’s top 5 for good growth – and it’s set to be given additional boosts through a plethora of new regeneration and investment programmes. Literally billions will be pouring into the city economy, and with them, tens of thousands of new jobs. Importantly, much of the economic and employment growth is centring upon sectors in which the city is already strong; sectors such as health, transport and financial services. And with the advent of major projects such as the Solent Freeport, these industries are only likely to expand. Rising employment will be one driver of another important consideration: the city’s growing population. In an urban area that’s already short of affordable accommodation, this will add further upward pressure to both rental values and house prices, so the longer-term rewards for investors should be considerable. Investors can also pick and choose to some extent; a robust student market, an ageing population, and a fast-recovering tourist industry are all creating opportunities in dependable niche sectors such as serviced accommodation, retirement properties and student lets. Looking beyond Southampton, neighbouring towns and cities such as Bournemouth and Portsmouth also stand ready to deliver similar rewards. Bournemouth should quickly recover its popularity as a major tourist hotspot, and Portsmouth will benefit from an extensive range of new regeneration projects, including the Freeport. For investors, the South Coast is therefore a region of considerable opportunity, and one that’s worthy of serious investigation.
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