Property Investment in Southampton and the South Coast

Most of our other investment guides have focused on a specific city or town, so this one is a little unusual, in that it considers a number of popular destinations along the central south coast of England. Here, we are talking about a stretch of coastline that runs between Portsmouth in the east to Bournemouth in the west. (We’ll cover nearby regions in separate guides.)

This is an area of considerable variety, one that encompasses historic cities and industrial areas as well as seaside villages and tourist resorts. Accordingly, it has a similarly varied appeal to property investors.

In our downloadable guide, we’ll explore the various factors influencing the local property investment market, including:

  • Key investment locations
  • Bournemouth
  • Portsmouth
  • Southampton
  • Key industry sectors
  • Regeneration and inward investment
  • Population growth in Southampton / the South Coast
  • Tourism in Southampton / the South Coast
  • Southampton’s housing market
  • Property market predictions

To download your free guide to investing the Southampton & the South Coast, please complete the form below:

Why Invest in the South Coast? A Summary

This section of the South Coast, which extends from Swanage to the Solent, offers property investors a variety of opportunities. For example, it encompasses well-known tourist destinations such as Swanage, Bournemouth and the New Forest, many of which are poised to rebound strongly from the Covid pandemic.

Further east, the economic powerhouses of Southampton and Portsmouth are attracting billions of pounds of investment and set to create thousands of new jobs. Moreover, with two major universities in Southampton and another in Portsmouth, there is potential for investment not just in short-stay holiday lets but in residential property and student accommodation.

 Key points to consider:

  • Traditional strengths in tourism – a fast-recovering sector
  • A focus for high value industries, including defence
  • Home to major employers such as BAE Systems
  • Two of Britain’s busiest port cities
  • Billions being invested into urban regeneration and infrastructure
  • Home to three popular and successful universities
  • Thousands of new jobs forecast
  • A growing population
  • An ageing population, creating more need for retirement properties
  • A good record of capital growth

Key Investment Locations

It’s beyond the scope of this guide to give detailed information about each separate community on the South Coast, partly because they are so numerous. Instead, we’ll focus on the region’s biggest towns and cities: Bournemouth, Portsmouth and perhaps most notably Southampton, where large-scale investments are re-shaping the property market.

Bournemouth: an Overview

With a population of around 183,000 and a £12 billion economy, Bournemouth is a well-known tourist resort. It saw its visitor economy contract in 2020 as a result of the Covid-19 pandemic, but 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.

Key Sectors

The local council notes that “The banking, finance and insurance sector is the most valuable to Bournemouth’s economy in terms of GDP.” It is home to important local employers such as JP Morgan, RIAS, McCarthy & Stone and Liverpool Victoria.

The creative and digital sector is also growing. In 2015, Bournemouth was reported to be the fastest growing location in the UK for tech jobs, and the council notes that the area is now home to more than 400 digital agencies.

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.

Regeneration and Inward Investment

In March 2021, Bournemouth secured £21.7 million to support the regeneration of its Boscombe waterfront district. This will fund the replacement of a local shopping centre, new commercial units, improved digital connectivity, and a public square. The money will be used in conjunction with £98.4 million of Local Growth funding secured by Dorset LEP.

                                     

Useful Data

Economy:                                           £12 billion

Average property value:               £337,042 (source: Zoopla, April 2021)

Average price gain:                         12.29% year-on-year (source: Zoopla, April 2021)

Average yields:                                Between 3.6 and 5.5% by postcode (source: Liveyield)

Please download your FREE guide to property investment in Southampton & the South Coast by completing the form below:

Portsmouth: an Overview

Part of Hampshire and centred upon Portsea Island, the city of Portsmouth has an urban population around 209,000 but the wider metropolitan areas is home to over 542,000 inhabitants. It is one of Europe’s most densely populated cities.

It is home to high-value industries such as defence and advanced manufacturing. This strength was 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 … (and is) listed as 16th least affected by Covid-related unemployment.”

Key Sectors

An historic port city, Portsmouth is home to large tier-1 employers such as BAE Systems Surface Ships, and to the Naval Dockyards. It is also served by Portsmouth International Port. It will typically handle over two million passengers per annum.

Describing the city’s resilience, 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.”

Other major employers include: Babcock International, L3Harris, QinetiQ, TPG, GKN Aerospace, Portsmouth Hospitals NHS Trusts and the University of Portsmouth. Portsmouth Naval Dockyards support a full 10% of all jobs in the city.

Regeneration and Inward Investment

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 regeneration: set to create 9,700 new jobs.
  • Tipner West / Lennox Point: a new marine employment hub expected to generate over 2,000 new jobs.
  • Dunsbury Park: a new commercial and industrial site with 665,000ft2 of development space; expected to create “hundreds of new local engineering and manufacturing jobs.”
  • Southsea Coastal Scheme:  the UK's largest local authority-led coastal defences project, this £100 million scheme will sustain hundreds of construction sector jobs.

Economic Impact: Portsmouth International Port

A 2017 study estimated the port’s economic value to the city. Key findings included:

Total economic contribution:     £390 million

Local economic impact:                £189 million

Multiplier effect:                             £0.4m of indirect benefits for every £1m generated

Employment:                                    5,590 jobs

Economic Impact: 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

City economy:                                  £13.7 billion (source: Centre for Cities)

Average property value:               £252,635 (source: Zoopla, April 2021)

Average price gain:                         +8% year-on-year (source: Zoopla, April 2021)

Average yields:                                Between 4.0 and 6.1% by postcode (source: Liveyield)

Population:                                        209,000 (source: World Population Review, 2017)

Population growth forecast:       +13,300 by 2026 (source: Hampshire County Council)

Business population:                     6,779 (source: Invest Portsmouth)

Employed jobs:                                99,600

Tourist visitors:                                9.3 million per year (typical)

Student population:                       24,000

Please download your FREE guide to property investment in Southampton & the South Coast by completing the form below:

Southampton: an Overview

Supporting a population of 239,400, Southampton is another economic powerhouse. In 2019, the Centre for Economic & Business Research (CEBR) found that Southampton’s economy had been performing better than any other city on the South Coast.

Similarly, in 2021, the PwC Good Growth for Cities report ranked Southampton in its UK top five for growth, showing a GVA growth rate of 5.1%. 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 Covid pandemic.

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.

Southampton has underlying strengths across a variety of sectors, and it is driving economic expansion with an ambitious programme of regeneration and inward investment. It’s also poised to see its population expand markedly – a function of organic growth plus the inward migration of new employees and their families.

For all these reasons, Southampton has a manifold appeal to property investors, which is why we’ll be devoting special attention to it in the following sections.

Southampton: Key Sectors

The city economy is valued at around £7.7 billion. The figure for the surrounding region will be considerably higher. Southampton City Council’s Economic Assessment for 2021 notes that the city had achieved healthy economic growth in all but two years since 1998. Since 2017, it has outperformed the wider South East by a healthy margin. GVA per head has also remained above the UK average. 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 below:

  • Transport / storage                        21%
  • Financial / insurance                      12%
  • Health / social                                   11%
  • Real estate                                        9%
  • Professional / scientific / tech    7%
  • Education                                           7%
  • Wholesale / retail                            5%

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

Regeneration and Inward Investment in Southampton

At both the city and county level, considerable investments are being made in economic regeneration. Some are part of the £3bn City Centre Masterplan, which was launched in 2012, while others are completely new. Examples include:

  • £1bn (development potential) for the new mixed use Mayflower Quarter development site on the waterfront
  • Over £100 million for city transport projects
  • £77 million for active and sustainable transport infrastructure
  • £70 million on River Itchen Flood Defences
  • £250 million development at Leisureworld (expected to create 1,000 jobs)
  • £4.5 million from Solent LEP to support the launch of a new Cancer Immunology Centre at the University Hospital

Solent Freeport

Many of the above schemes, while important 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 will 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.”

Population Growth Projections

In the face of so much local investment and regeneration, it’s small wonder that Southampton Council expects the population to grow 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.

The Southampton Data Observatory website notes: “Southampton’s total resident population will increase to 273,020 people by 2025, a rise of 6.5% from 2018.” It expects the figure to keep on rising, thanks partly to the fact that residents are 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 to younger people, which could intensify competition amongst buyers and, thus, drive prices higher.  It could also 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 local population is expected to grow 12.3% by 2041, which equates to an increase of 30,800 residents.

Age-group Population Forecasts (to 2041)

  • 15 to 24                +12.3%
  • Over 65                 +43.4%
  • Over 90                 +95%

The Student Population

The city has two universities: the University of Southampton, and Southampton Solent University. The Southampton Economic Assessment 2021 notes that in 2019/20 “there were 33,175 higher education students in Southampton.” Student numbers rose by 1.7% year-on-year.

A rising population will inevitably increase 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.

Tourism

Another source of demand for property is the tourism market. The city is popular amongst British holidaymakers but it also attracts many overseas visitors via its international airport and Europe's busiest cruise port, which handles over 1.6 million passengers every year.

According to figures published in 2020 by Hampshire County Council, tourism supports 89,000 jobs and contributes 33.3 billion to the Portsmouth and Southampton economies.

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.

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.” For comparison, when Hull was UK City of Culture in 2017 it added £300 million to its visitor economy.

Southampton’s Housing Market

Currently, demand for housing 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.

Market Data

Average values, April 2021:         £315,034 (source: Zoopla)

Average price growth:                   9.38%, year-on-year (source: Zoopla)

5-year price forecast:                    +17% (source: Savills)

Average yields:                                Between 4.9% and 5.6% by postcode (source: LiveYield)

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.

  • A resilient economy– one of the UK’s top 5 for good growth
  • Ambitious economic regeneration plans
  • Billions in new investment expected
  • Tens of thousands of new jobs forecast
  • A rising population
  • A dependable student market
  • Steady growth in the retirement market

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.

For more details on investing in Southampton, Bournemouth, Portsmouth and other surrounding areas, please download our free guide by completing the form below:

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