“The growth of the private rented sector, and
the arrival of an investor class of buy to let landlords within it, is an issue
that won’t be going away anytime soon, no matter what you read in the Daily
Mail”, I said, as I chatted over a coffee with a landlord client of mine at
Espresso Corner on Kirkgate in the town. Whether you are a landlord of mine (or
not as the case maybe), I am always happy to look over any properties you are
thinking of buying for buy to let purposes and more so over a coffee!
Some
commentators are saying buy to let is about to die, with the new stamp duty
changes and how mortgage tax relief will be calculated. Some say 500,000 rental
properties will flood the market nationally in the next 12 months as landlords
leave the rental market. Have you heard the phrase ‘Bad news sells newspapers’?
Let me explain why buy to let in Huddersfield is only going in one direction –
and not the direction the papers say they are going.
According to Sheffield
University, buy to let landlords will continue fuelling the growth of the
private rented sector in the coming decades. By their estimates (and they are
considered a centre of excellence on the topic), the rate of homeownership nationally
will fall to 50% (today it is 63.7% in Huddersfield) by 2032, while the rate of
private sector renting will increase to 35% (interestingly, in Huddersfield it
stands at 18.8% today).
Therefore, the demand for rental accommodation in Huddersfield will grow by 2,659 households
in the next five years ... and these are the reasons why, irrespective of the
distractions set out in the newspapers
Huddersfield property
values over the last six years have risen a lot more than average
wages/salaries, meaning as homeownership and mortgage availability is dependent
on your ability to pay has served to push home ownership further out of reach
for many, at a time when the stock of council houses has actually withered. (Nationally, the number of council houses in
the last ten years has dropped from 3.16m to 2.18m households - a drop of 31.1%).
Now it’s true the
Tory’s efforts to fix the deficiency of affordable housing have focused on
those who want to buy a home, ranging from Help to Buy and their much vaunted
Help to Buy Isa, and Starter Homes Scheme, an initiative offering a 20%
discount for first time buyers … but if you are unable to save for the deposit
... none of this means anything to the ‘20
something’s’ of Huddersfield ... and they still need a roof over their heads!
Currently, 28,364 people live in private rented accommodation in Huddersfield
These are big numbers
and a sizeable chunk of the electorate. So whilst it appears Huddersfield
“Generation Rent” youngsters will continue to rent and to not to buy for the
reasons set out above, Huddersfield buy-to-let landlords will be lifted by the
projections of greater rental demand. Huddersfield and the area around it still
offers the prospect of strong economic growth forecasts and has a reputation as
a lively and desirable place to live. You see, with the new rules on tax, more
and more landlords will be looking to move away from the previous honeypot of
central London, because its higher prices meant lower rental yields. With the
new tax rules and central London’s cooling of house price inflation, more and
more landlords will look further afield, including Huddersfield (interestingly, I have already been chatting
to a few central London landlords after they read the Huddersfield Property
Blog).
So, by 2021, the number of rental properties in Huddersfield will rise
to 18,292
This prediction in
growth of the Huddersfield rental market is even on the back of the government clamping
down on tax reliefs for landlords. The point is this, gone are the days of
making guaranteed returns on BTL property. For the last 20 to 30 years,
irrespective of which property you bought, making decent money on buy to let
property was like shooting fish in a barrel – anyone could do it - but not now. You must take a more
considered approach to your existing and future portfolio, especially in Huddersfield.
The balance of capital growth and yield, especially in this low interest rate
world we live in, means Huddersfield landlords need to do more homework to
ensure the investment in property gives the desired returns. One place for Huddersfield
landlords and homeowners to visit for such information is the Huddersfield
Property Market Blog. http://huddersfieldproperty.blogspot.co.uk/
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