My concerns about the Huddersfield Property market

I am genuinely concerned about the Huddersfield property market, but in a way that might surprise you.  Rightmove announced that average ‘asking prices’ fell slightly last month by 0.8% in the Yorkshire region, leaving them 2.0% higher than a year ago.  Whilst it could be said that monthly change is very modest, in the same period a year ago, we saw a monthly fall of 0.5% in Yorkshire, which is more the norm given the onset of  schools breaking up and everyone going on holiday.

Looking at all the data on the Huddersfield property market; putting aside the need for more houses to be built in the next decade to balance out the increase in population (helped in part by inward European migration) but not matched by a similar increase in housing being built; my research shows there is a widening gap between what property buyers want and what is available to buy. In a nutshell, many more buyers are looking for the smaller one and two bed properties (the typical semi detached and smaller terraced houses/apartments), whilst there is an oversupply of the four and five bed properties, which are the typical large detached properties available.

 Demand for smaller properties comes from both first time buyers and the growing number of buy to let landlords, where it is more cost effective and efficient to buy smaller properties to let out compared to larger properties which tend to offer poorer returns.  Also, landlords with larger loans (on those larger more expensive properties) will also be hit harder with the changes in the way tax is paid on buy to let investments, which start in 2017.

If you recall, a few weeks ago I did some research on how different types of properties had performed in Huddersfield since the year 2000.  I revisited those calculations and it hit me how different types of properties had performed over the last 15 years.  In a nutshell, this mismatch of demand and supply isn’t a new phenomenon, it’s been happening under our noses for years!

In the last 15 years, the average detached house in Huddersfield has risen in value from £101,882 to £244,100 whilst the terraced house has risen in value from £30,770 to £93,238.  Nothing seems amiss until you look at the percentage growth.  The detached has grown in value by 139% whilst the terraced by 203% meaning the gap between the inexpensive terraced house and expensive detached properties has in percentage terms has decreased.

I am concerned because more houses need to be built, not only in Huddersfield, but in Yorkshire and the UK as a whole.  In particular, there is specific need for more affordable starter homes for the growing demand from both tenants (and the landlords that will buy them) and first time buyers.  The Tories need to face up to the fact that unless they can get the builders, the planners (to release more building land), the banks (to finance it) and themselves together, to ensure long term plans can be made, and implemented, this issue will continue to worsen.

The country needs 200,000 houses a year to be built to keep up with demand, let alone reverse the imbalance between demand and supply.  Last year, only 141,040 properties were built, the year before 135,510 and 146,850 in the year before that.  This means only one thing for Huddersfield landlords.  Unless David Cameron starts to rip up huge swathes of the British countryside and build on acres and acres of green belt, demand will always exceed supply when it comes to property for the foreseeable future.

 Therefore, investment in the local Huddersfield property market as a buy to let investment could be the best move to make as the stock market investments are possibly on the wane.  Everyone is different and trust me, there are many pitfalls in buy to let.  You must take lots of advice and seek out the best opinion.  One source of opinion, specific to the Huddersfield property market is the Huddersfield Property Blog  http://huddersfieldproperty.blogspot.co.uk/

Huddersfield Property Values 3% higher than year ago

Huddersfield property values fell by 1.2% last month, meaning they are 3% higher than 12 months ago. Even though values dropped slightly, overall, I expect future property price growth to remain firm, built on the foundations of an improving labour market, strengthening economy and very low mortgage rates. In fact, talking to a number of other agents in the city, mortgage arrangers and solicitors (all of whom have their direct finger on the pulse of the Huddersfield property market), the steady long term growth in Huddersfield property prices tied in by strong demand conditions so far this summer, alongside an underlying lack of supply and the continued low mortgage rate environment, means the slow but steady upward momentum of the Huddersfield property market is likely to continue in the second half of 2015.

 However, there are a couple points I wish to highlight as all my blog readers will know, I like to give a balanced and honest opinion of what is happening in the Huddersfield property market.  The two main points being low interest rates and a lack of supply of property.

Interest rates first -  Mark Carney (Chief of the Bank of England) said in a  speech a  few weeks ago at Lincoln Cathedral, the Bank will be seriously considering raising interest rates around Christmas time. An upward movement in interest rates will temper demand and result in a marked slowdown in house price growth.  Mr Carney said that only six out of ten people had a mortgage (57% to exact) had a variable rate mortgage, compared with more than seven out of ten people  ( 73% to be exact) in the Summer of 2012. Now I am not a mortgage arranger and cannot give advice, but rates are only going on one direction, so whether you are a landlord or homeowner, this might be a time to consider fixing your mortgage rate?  Don’t say I didn’t warn you!

Tie this in with the stricter mortgage lending rules which were introduced in 2014, which affected people’s ability to have larger mortgages, this means homeowners will need to be realistic in their pricing if they want to sell. Reading other recent reports though, property owners have continued to pay off mortgages at a faster rate while mortgage rates have been low. Therefore, when mortgage rates rise, the affect on home movers sentiment which, given the shortage of supply, would result in a marked slowdown in the rate of house price growth.

Shortage of Supply – As I have mentioned in previous articles, the number of houses on the market in Huddersfield is at an all time low. One reason is the large number of buy to let landlords who have bought Huddersfield property over the past fifteen years. Unlike first time buyers who tend to move on after a few years, landlords tend to keep their properties long term, meaning there are less properties coming onto the market ... thus restricting supply and sales. In fact over the last four months, only 1,398 properties in the Kirklees Metropolitan Council area have changed hands and sold, compared to 1,584 in the same time frame in 2014, a not so insignificant drop of 11.74%. 

If you are planning on investing in the Huddersfield property market, or just want to know more, things to consider for a successful buy to let investment, one source of information is the Huddersfield Property Blog http://huddersfieldproperty.blogspot.co.uk/

Huddersfield – The 10 year Time Bomb on Home Ownership

Many people think the British obsession with owning your own home started with Thatcher in the early 1980’s, when she allowed council tenants to buy their council houses under the right to buy scheme. However, the growth actually started just after the Second World War. Looking at the country as a whole in 1951 30% of residential property was owner occupied then, every ten years that rose incrementally to 39% by 1961; 51% by 1971; 58% by 1981 and 68.07% by 2001 but after that, it dropped to 63.4% by 2011 and continues to drop today.

Young adults tend to start to think about settling down and moving out of the family home in their early-mid twenties.  After a couple of years, they will have a choice of either buying their first house (albeit with a mortgage) or decide to privately rent for the long term (because the Council House waiting list is measured in decades at the moment!). The ratio of people owning a house with a mortgage verses privately renting is an extremely important guide to what people are doing about their housing needs and what their attitude to renting vs buying is.  With that in mind, within the next ten years, I am predicting there will be more people renting privately in Huddersfield than own a property with a mortgage and that the British love affair of property ownership will fade as the decades roll on.

This is a really important change in the way we live, as I explained to a local Huddersfield landlord the other day, knowing when and where the demand of tenants is going to come from in the coming decade is just as important as knowing the supply side of the buy to let equation, in relation to the number of properties built in the town; Huddersfield property prices and Huddersfield rents.
In the Kirklees Council area as a whole there are 24,523 households that are privately rented via a landlord or letting agency verses 61,404 households that are owned with a mortgage, so my prediction appears to be outrageous. However, when we look deeper (as the devil is always in the detail), 30,378 of those 61,404 households are 35 to 49 year olds and 17,006 are households of 50 to 64 year olds. I would expect all the 50+ years to be paying their mortgage off as they enter retirement as I would with some of the people in their mid/late 40’s.

Meanwhile, at the other end, in the 25 to 34 age range (the age most people bought their first home in the 1970’s/80’s/90’s) only 10,662 of the 18,227 households occupied by those 25 to 34 year olds are owner occupiers with mortgages, because 7,565 households are privately rented. This means only 58.4% of 25 to 34 year olds have bought their house (with a mortgage). Twenty years ago, that would have a much higher percentage of homeowners (between 75% to 85%).

It can be seen that as the older generation pay their mortgages off as they start to get to retirement and the younger generation aren’t jumping on the property ladder like they were 20 or 30 years ago, the private rental sector will take up the slack as more and more people will want a roof over their head, but won’t buy one but rent one. With Local Authorities and Housing Associations not building houses anywhere near like the number of houses they were building in the 1950’s, 60’ and 70’s, the private landlord appears to have good demand for their rental properties for many decades to come.
This will create a polarisation in the housing market between those, mostly older, households who own outright and those, mostly younger, households who rent. Our housing market is very much turning into the European model. However, all is not lost, the younger generation will inherit their parents properties, which in turn will enable them to buy, albeit later in life.

If you are a landlord or thinking of become a landlord, and would like to read more articles like this and other information on the Huddersfield Property Market, then please visit the Huddersfield Property Blog  http://huddersfieldproperty.blogspot.co.uk/