Huddersfield Property Market in Crisis : Who is to blame?

‘An Englishman’s Home is his Castle’ is the phrase that was coined in Victorian times as the UK has a reputation for being a country of home owners  .. but the truth could be further from the point, because in a league of the top 46 economic nations of the world, where owning your property is permissible, the UK is only ranked no.37.

As I mentioned a couple of weeks ago, at the end of the First World War, 77% of people rented their home (the vast majority renting from a private landlord as Council Housing was still very much in its infancy). Homeownership rose very slowly in the 1920’s and started to grow as the economy grew after the Great Depression. However, after the Luftwaffe had flattened huge swathes of housing in the early 40’s, the priority was to get people into clean and decent accommodation .. so Local Authority’s (Councils) took up the baton and they built large council estates in the 1950’s and 1960’s.

As the UK economy got back on its feet in the middle part of the 20^th Century and wages rose, people decided they wanted to own their own home instead of renting. Throughout the post war decades, it became easier to secure a mortgage. Interestingly, by 1977, 61.6% of 30 to 34 year olds were owner occupiers with a mortgage compared to 8.7% of 30 to 34 year olds being in private rented accommodation (the remaining either being in council housing or living with friends or family). Ten years later, in 1987, we saw some significant growth in homeownership, as 68.2% of 30 to 34 year olds had a mortgage and only 4.6% of people privately rented. A decade later and there wasn’t much change as, in 1997, the homeownership figure was 68.3% but private renting had jumped to 12.1% in the same 30 to 34 year old age group.

Move on another ten years to the 2007 figures, and this showed a slight drop in homeownership to 65.8% but renting had continued to increase to 18.7% (in the 30 to 34 year old age group). The latest set of figures is for 2014, and only 47.2% of 30 to 34 year olds had a mortgage and an eye watering 33.4% of 30 to 34 year olds privately rent.

When we look at the Huddersfield figures of homeownership, looking back to 1991, 58.94% of Huddersfield households were owned by the homeowner, whilst 7.95% of Huddersfield households were privately rented, whilst the 2011 census showed home ownership in Huddersfield had dropped to 58.22% and private rented had increased to 19.57%. Much of the recent rise in the occurrence of private renting in Huddersfield since the turn of the Millennium is not because property has become more expensive, but the fact these 30 somethings haven’t got a council house to move into (because they were all sold off) – so they have to rent. The selling of council housing in the 1980’s (a subject I have talked about in a previous article in the Huddersfield Property Market Blog) artificially grew homeownership in the 1980’s, but as these people have got older, the younger generation didn’t have the same opportunity to buy their council house in the 1990’s, 2000’s or 2010’s. That is why, unless the council start building council houses by the acre, and hundreds of acres, private renting will continue to grow in Huddersfield.

So if you want blame anyone .. blame the Grocer’s daughter from Grantham – Mrs T …. but before you do – do remember in the 1970s, the UK was called the "sick man of Europe" by critics of the UK government, because of industrial strife and poor economic performance compared to other European countries culminating with the Winter of Discontent of 1978/9 and if it hadn’t been for her we wouldn’t be where we are today.

Rents in Huddersfield rise by 1.3% in the last year

I was reading the Sunday Papers, as is my want and, when reading the financial pages, it was announced UK inflation had increased to its highest level in a year. Inflation, as calculated by the Government’s Consumer Prices Index, rose by 0.3% over the last 12 months.  The report said it had risen to the those ‘heady’ levels by smaller falls in supermarket and petrol prices than a year ago. If you recall, in early 2015, we had deflation where prices were dropping!

So what does this mean for the Huddersfield property market ... especially the tenants?

Back in November, the Office of National Statistics stated average wages only rose by 1.8% year on year, so when adjusted for inflation, Huddersfield people are 1.5% better off in ‘real’ terms.   Great news for homeowners, as their mortgage rates are at their lowest ever levels and their spending power is increasing, but the news is not so good for tenants.

The average rent that Huddersfield tenants have to pay for their Private Rental Properties in Huddersfield (i.e. not housing association or council tenants) rose by 1.3% throughout 2015, eating into most of the growth.  2015 wasn’t a one off either.  In 2014, rents in Huddersfield rose by 0.4% (where salaries only rose by only 0.2%) However, it’s not all bad news for Huddersfield tenants, because in 2013 rents rose by 0.6%, (but salaries rose by 2.2%).

… and it must be noted that the private rents Huddersfield tenants have had to pay for Huddersfield property since 2005 are only 18.6% higher, not even keeping up with inflation, which over the same time frame, rose at 27.8% (although salaries were only 22.3% higher over the same time period)

More and more, talking to 20 and 30 somethings who rent – it’s a choice.  Gone are the days where owning your own property was a guaranteed path to wealth, affluence and prosperity.    I know keep mentioning Europe, but some of the highest levels of home ownership are in Romania at 96.1%, Hungary at 88.2% and Latvia at 80.9% (none of them European economic dynamos) and even West European countries like Spain at 78.8% and Greece at 74% (and we know both of those countries are on their knees, riddled with national debt and massive youth unemployment).

At the other end of the scale, whilst we in the UK stand at 64.8% homeownership, in Europe’s powerhouses, only 52.5% of Germans own a home and only 44% of Swiss people are homeowners.  Looks like eating chocolate, sauerkraut, renting and good economic performance go hand in hand.  Yet, joking aside, home ownership has not always been the rule in the UK.   In 1918, only 23% of people were homeowners, with no council housing, meaning in fact, 77% were tenants.

Tenants have choice, flexibility to move, they don’t have massive bills when the boiler blows up, it’s a choice.  Huddersfield rents are growing, but not as much as incomes. To buy or not to buy is an enormously difficult decision.   For while buying a Huddersfield home is a dream for the majority of the 20 and 30 something’s of Huddersfield have, it might not leave them better off in the long run and it isn’t necessarily the best option for everyone.  That is why, demand for renting is only going in one direction – upwards.

Huddersfield Property Values rise by 0.1% month on month

 I do like to have a coffee at Coffeevolution on Church Street in Huddersfield. Whilst in there, a suited gentleman approached me and asked if I was the person who wrote the newsletters about the Huddersfield property market. We ended up having an interesting chat about the local property market, as he was concerned his daughter would never be able to buy her own property, a place in Huddersfield she herself can call home.

My latest analysis, using the Land Registry and Office of National Statistics, shows that overall, month on month, Huddersfield property values increased by 0.1%. The year on year figures showed the value of residential property in Huddersfield has increased by 1.3% in the year to the end February 2016, taking the average value of a property in the council area to £115,100.

It gets even more interesting when we look at the last few months’ figures and see the patterns that seem to be emerging.

·         January 2016               - a rise of 0.1%

·         December 2015          - a drop of 0.2%

·         November 2015          - a rise of 0.5%

We have talked in many recent articles about the lack of properties being built in Huddersfield over the last 30 years. This lack of new building has been the biggest factor that has contributed to Huddersfield property values still being 105.82% higher than in 1995. At the risk of repeating myself, until the Government addresses this issue, and allows more properties to be built, things will continue to get worse as the UK population grows at just under 500,000 people a year (which is a combination of around 226,000 people because of higher birth rates/people living longer and 259,000 net migration) whilst the country is only building 152,400 properties a year – no wonder demand is outstripping supply.

Another reason intensifying the current level of property values in Huddersfield, is the fact that people aren’t moving home as much as they used to, meaning fewer properties are coming onto the market for sale, so in consequence, there is a lack of choice of property to buy, meaning people thinking of moving are discouraged from putting their property on the market ... thus perpetuating the problem, as the scarcity of possible properties to buy in order to move also deters people from offering their home for sale. This unevenness between demand from would-be purchasers and the number of properties coming on to the market for sale is causing pressures in Huddersfield (and the rest of the UK).

So what of the future of the Huddersfield property market and this man’s daughter? I firmly believe the property market in Huddersfield and the country as a whole is changing its attitude about homeownership. Back in the 1960’s, 70’s, 80’s and 90’s, getting on the property ladder was everything. Since the late 1990’s, we as a country (in particular, the young) have slowly started to change our attitude to homeownership. We are moving to a more European model, where people choose to rent in their 20’s and 30’s (meaning they can move freely and not be tied to a property), then inherit money in their 50’s when their property owning parents pass away, allowing them to buy property themselves ... just like they do in Germany and other sophisticated and mature European counties, meaning his daughter will end up owning property, just later in life than we did. So, whatever the vote on the 23rd of June, if you think about it, we might be more European than we think!

31% of Huddersfield people Rent - Is that Healthy?

Renting used to be a dirty word in the 60’s and 70’s. You either lived in a ‘Rigsby Rising Damp’ style bedsit with wood chip on the wall and a coin operated electric meter (that buzzed in the night) or you lived in a council house. In the latter part of the 20^th Century, the British were persuaded that rent payments were ‘wasted money’. However, owning often makes less financial sense than renting and as the rate of homeownership is starting to drop substantially, as we roll the clock forward to today, there is no stigma at all to renting .. everyone is doing it. In fact, of the 160,399 residents of Huddersfield, 49,997 of you rent your house from either the local authority/social provider (ie council house or housing association) or private landlords – meaning 31.17% of Huddersfield people are tenants.

The idea of homeownership is deeply embedded in the British soul, in fact 107,657 Huddersfield people live in an owner occupied property (or 67.11%). Housing is at the heart of Government policy, as George Osborne has promised 200,000 new properties a year so first time buyers can buy their first home whilst recently changing the tax laws for buy to let landlords. To get votes, Thatcher (and everyone since) ran election campaigns promising everybody their own home, and as a country, we seem to equate homeownership the goal of British life.

So as more and more people are renting nowadays, are we turning to a more European way of living? Well, I believe, as a country, we are. In fact, homeownership could be affecting your health! The UK, according to Bloomberg, is only the 21^st most healthy country in the world. Germany is at No.10 and Switzerland at No.4 and homeownership is at 52.5% and 44% respectively in those countries (in the UK it is 64.8%).

In the Kirklees Council area, 72.23% of homeowners who own their house outright said they were in ‘very good’ or ‘good’ health whilst, at the other end of the scale, 7.42% said their health was ‘bad’ or ‘very bad’. Looking at renting, the census splits tenants into two types – 65.5% of Kirklees local authority/social tenants said they were in ‘very good’ or ‘good’ health and 13.23% were in ‘bad’ or ‘very bad’ health …

… whilst ‘private rented tenants’ in Kirklees, were the healthiest, as 82.96% of them described themselves in ‘very good’ or ‘good’ health and only 5.07% were in ‘bad’ or ‘very bad’ health

I am not suggesting that low homeownership rates in Switzerland and Germany are directly linked to health, nor, do I expect Brits to all go to Berlin, Interlaken or Düsseldorf and realise how happy people are when they don't need to worry about all the stresses which accompany homeownership. The numbers for Kirklees do go some way to back up the argument (and they are the same across the whole of the UK). Nonetheless I do think that substantially all of the upside to homeownership in recent years has been a function of monumental rising house prices. Now that's come to an end, it's hard to see why anybody would want to buy?

Renting is here to stay in Huddersfield and it’s growing incrementally each year. Even with the new tax rules for landlords, buy to let is still a viable investment option for most people in the Town. There has never been a better time to buy buy to let property in Huddersfield, but buy wisely. Gone are the days that you would make profit on anything with four walls and a roof. Take advice, take opinion, do your homework. One place to do more homework, to read more articles on the Huddersfield Property market like this, is the Huddersfield Property Blog http://huddersfieldproperty.blogspot.co.uk/

What would Brexit mean to the 43,700 Huddersfield Property owners?

I don’t know about you, but I find if you read the Daily Mail, there are only three topics that make the blood boil of ‘Middle England’. Bureaucracy from Brussels, House Prices and the late Princess of Wales. Ignoring the late Princess if I can for this article, but if we as a country were to unshackle ourselves from chains of Brussels (the first topic), could we inadvertently effect the second topic and make UK house values drop?

If you read all the newspapers, the Brexit debate seems to be focused solely on central London. Many commentators have said Brexit would mean central London would have a lower standing in the world, meaning less people would be employed in Central London, with the implication of lower wages, fewer jobs etc., in Central London ... but we are in Huddersfield, not Marylebone, Mayfair or any part of Zone 1 London.

Now on the run up to the vote on the 23^rd of June, I predict the ‘in’ camp will start to scare homeowners with forecasts of negative equity, and the ‘out’ camp will appeal the 20 somethings, who have been priced out of the property market with the prospect of a new era of inexpensive housing, should the fears of central London estate agents and developers, who believe the bottom will fall out of the market if we do leave, become real. The only reason the Mayfair’s, Knightsbridge’s, and Kensington’s of central London are attractive to foreign buyers are political and economic steadiness, an open and honest legal system and a lively cultural life. None of that is threatened by Brexit.

... But again, we are in Huddersfield and central London is 190 miles away. We are hometown to Huddersfield RUFC, George Hirst and, of course, the Right Honourable Harold Wilson, and whilst the central London property market exploded after 2009, that explosion really and honestly didn’t affect the Huddersfield property market. So, putting central London aside, what would an ‘in’ or ‘out’ vote really mean for the 43,700 property owners of Huddersfield?

Initially, over the coming months, on the run up to referendum, I believe it will be like the run up to last year’s General Election. With the short-term uncertainty in the country, quite often, big decisions are put on ice and people are less likely to make big money purchases i.e. buy a property. However, in the four months up to last year’s Election, property values in Huddersfield decreased by only 0.89%, not bad for a country that thought it would get a hung parliament! So that argument doesn’t hold much weight with me.

Post vote, should the UK opt to leave Brussels, there would be a much more noteworthy impact. I believe that a vote to stay in the EU would see the Huddersfield property market return to a status quo very quickly, but the contrasting result could lead to some changes. The principal menace to the Huddersfield (and UK) housing market could be variation (in an upwards direction) in interest rates as a result of a Brexit, which could theoretically see the cost of mortgages grow swiftly, pricing many out of the market … but then two thirds of landlords buy without a mortgage, so that won’t affect them. Also, according to the Bank of England, 80.33% of all new mortgages taken out in 2015 were fixed rate. Looking at all mortgages as a whole, according to the Bank of England, 44% of all UK mortgagees have a fixed rate mortgage, but 56% don’t, so if you aren’t on a fixed rate ... talk to your mortgage broker now, because they can only go in one direction!

So in reality, if I really knew what will happen, I wouldn’t be a letting / estate agent in Huddersfield, but a City Whiz Kid in London earning millions. However, I suspect whatever decision the electorate of Huddersfield and the country as a whole makes, over the long term it won’t have a major effect on the Huddersfield property market. We have seen off ‘the end of the world’ credit crunch of 2008/9 and subsequent property crash, the 1988 Nigel Lawson induced post dual-MIRAS property crash, the 1979 Winter of Discontent property crash, the 1974 oil crisis that stimulated another property crash ... hell, we can even go back nearly a century with the 1926 post General Strike slump in property prices...

Today, property prices are 105.82% higher than 21 years ago in Huddersfield and are 1.3% higher than 12 months ago. So, make your own decision on 23^rd of June 2016 safe in knowledge that whatever the result, there might be some short term volatility in the Huddersfield property market, but in the long term (and property investment is a long term strategy) there aren’t enough houses in Huddersfield to live in either to buy or rent … and until the Government allow more properties to be built – the Huddersfield property market, will be just fine ... even if it has a little blip in the summer, there could be some property bargains on the run up to Christmas to be had!

For more advice and opinion on the Huddersfield property market, even where those buy to let bargains could be found now ... visit the Huddersfield Property Blog http://huddersfieldproperty.blogspot.co.uk/       

New survey shows shocking problems for landlords not using letting agents

A new survey by insurer Direct Line for Business suggests that landlords who have not instructed letting agents to act for them are often making significant numbers of errors - including unwittingly giving tenants contracts that are not legally compliant. 

Of the landlords who don’t use a letting agent, 58 per cent used adapted tenancy agreements from either old agent contracts or other landlords (38 per cent) or an updated template they found online (20 per cent). 

It appears landlords employ letting agents when they first rent out the property, then use the old contract template when agreeing a direct rental with new tenants or upon renewal with their existing tenants. Direct Line for Business says the lack of professionally reviewed tenancy agreements may explain why 13 per cent of landlords have experienced disputes specifically arising from tenants’ rental contracts in the last two years.

It says it is also a concern that nine per cent of landlords have not informed their tenants that their deposit is held in a government-backed tenancy deposit protection scheme - despite the fact it’s a legal requirement that landlords provide the name and contact details of the tenancy deposit protection scheme and its dispute resolution service within 30 days of taking a deposit. 

The research also revealed that four per cent of landlords have not taken any deposit from their tenants.

“If an old contract is adapted it may not comply with new legislation or be relevant for the current market. Given the volume of disputes arising from tenancy agreements it’s important to get the contract seen by a legal professional before it’s signed” explains Nick Breton, head of Direct Line for Business.

The survey reveals that some 38 per cent of landlords in England have never heard of the government’s ‘How to rent: the checklist for renting in England’ and only 29 per cent of landlords have supplied or directed tenants to this guide.