Slowing Huddersfield Property Market? Yes and No!

My thoughts to the landlords and homeowners of Huddersfield…

The tightrope of being a Huddersfield buy-to-let landlord is a balancing act many do well at. Talking to several Huddersfield landlords, they are very conscious of their tenants’ capacity and ability to pay the rent and their own need to raise rents on their rental properties (as Government figure shows ‘real pay’ has dropped 1% in the last six months). Evidence does suggest many landlords feel more assured than they were in the spring about pursuing higher rents on their properties.

During the summer months, historic evidence suggests that the rents new tenants have had to pay on move in have increased. June/July/August is a time when renters like to move, demand surges and the normal supply and demand seesaw mean tenants are normally prepared to pay more to secure the property they want to live in, in the place they want to be. This is particularly good news for Huddersfield landlords as average Huddersfield rents have been on a downward trend recently. So look at the figures here...

Rents in Huddersfield on average for new tenants moving in have risen 1.6% for the month, taking overall annual Huddersfield rents 1.1% higher for the year

However, several Huddersfield landlords have expressed their apprehensions about a slowing of the housing market in Huddersfield. I think this negativity may be exaggerated.

Before we get the Champagne out, the other side of the coin to property investing is capital values (which will also be of interest to all the homeowners in Huddersfield as well as the Huddersfield buy-to-let landlords).  I believe the Huddersfield property market has been trying to find some level of equilibrium since the New Year.  According to the Land Registry…

Property Values in Huddersfield are 3.08% higher than they were 12 months ago, rising by 0.93% last month alone!

Yet, I would take those figures with a pinch of salt as they reflect the sales of Huddersfield properties that took place in early Spring 2017 and now are only exchanging and completing during the summer months.

The reality is the number of properties that are on the market in Huddersfield today has risen by 7.19% since the New Year and that will have a dampening effect on property values. As tenants have had less choice, buyers now have more choice ... and that will temper Huddersfield property prices as we head towards 2018.

Be you a homeowner or landlord, if you are planning to sell your Huddersfield property in the short term, it is crucial, especially with the rise in the number of properties on the market, that you realistically price your property when you bring it to the market ... with the increase in choice of properties, the balance of power during negotiation generally sways towards the buyer. Given that everyone now has access to property details, including historic stats for how much property have sold for, they will be more astute during the offer and negotiation stages of a purchase.

However, even with this uplift in the number of properties for sale in Huddersfield, property prices will remain stable and strong in the medium to long term. This is because the number of properties on the market today is still way below the peak of summer of 2008, when there were 1,227 properties for sale compared to the current level of 760 (if you recall, prices dropped by nearly 20% in Credit Crunch years of ‘08 and ‘09).

Compared to 2008, today’s lower supply of Huddersfield properties for sale will keep prices relatively high...and they will continue to stay at these levels for the medium to long term.

Less people are moving than a few years ago, meaning less property is for sale. Fewer properties for sale mean property prices remain relatively high and this is because of a number of underlying reasons. Firstly, buy-to-let landlords tend not sell their properties as often than owner-occupiers, consequently removing the property out of the housing market selling cycle. Secondly, Stamp Duty is much higher compared to 10 years ago (meaning it costs more to move). Next, there is a dearth of local authority rental housing so demand for private rented housing will remain high. Then we have the UK’s maturing owner occupier population, meaning these older people are less likely to move (compared to when they were younger). Another reason is the lack of new homes being built in the country (we need 240k houses a year to be built in the UK and we are currently only building 145k a year!) and finally, the new mortgage rules introduced in 2014 about how much a person can borrow on a mortgage has curtailed demand.

Some final thought’s before I go – to all the Huddersfield homeowners that aren’t planning to sell – this talk of price changes is only on paper profit or loss. To those that are moving ... most people that sell, are buyers as well, so as you might not get as much for yours, the one you will want to buy won’t be as much, (swings and roundabouts as Mum used to say!)

To all the Huddersfield landlords – keep your eyes peeled – I have a feeling there may be some decent buy-to-let deals to be had in the coming months. One place for such deals, irrespective of which agent is selling it, is my Huddersfield Property Blog ... https://huddersfieldproperty.blogspot.co.uk/

Huddersfield’s New 3 Speed Property Market

“What’s happening to the Huddersfield Property Market” is a question I am asked repeatedly.  Well, would it be a surprise to hear that my own research suggests that there isn’t just one big Huddersfield property market – but many small micro-property markets?

According to recent data released by the Office of National Statistics (ONS), I have discovered that at least three of these micro-property markets have emerged over the last 20+ years in the town.

For ease, I have named them the …

1.      ‘lower’ Huddersfield Property Market.

2.      ‘lower to middle’ Huddersfield Property Market.

3.      ‘middle’ Huddersfield Property Market.

The ‘lower’ and ‘lower to middle’ sectors of the Huddersfield property market have been fuelled over the last few years by two sets of buyers. The first set, making up the clear majority of those buyers, are cash rich landlord investors who are throwing themselves into the Huddersfield property market to take advantage of alluringly low prices and even lower interest rates. The other set of buyers in the ‘lower’ and ‘lower to middle’ Huddersfield property market are the first-time buyers (FTB), although the FTB market is in a state of unparalleled deadlock as it’s been trampled into near-immobility and incapacity by the new 2014 stricter mortgage affordability regulations and also fewer mortgages with low deposits. 

Some of you may be interested to know how I have classified the three sectors ..

1.      ‘lower’ Huddersfield housing market – the bottom 10% (in terms of value) of properties sold

2.      ‘lower to middle’ Huddersfield housing market – lower Quartile (or lowest 25% in terms of value) of properties sold

3.      ‘middle’ Huddersfield housing market - which is the median in terms of value

…. and if one looks at the figures for Kirklees Metropolitan Borough Council area you can see the three different sectors (lower, lower/middle and middle) have performed quite differently.

Kirklees Metropolitan Borough Council Property Market – Sold Prices	Price Paid in 1995	Price Paid in 2017	Percentage Uplift 1995 - 2017
Lower (Bottom 10%)	£22,500	£72,000	220.00%
Lower to Middle (Lower Quartile)	£31,500	£98,000	211.11%
Middle (The Median)	£47,474	£160,417	237.91%

You can quite clearly see that it is the ‘middle’ market that has performed the best.

You might ask, what do all these different figures mean to homeowners and landlords alike?  Quite a lot – so let me explain. The worst performing sector (with the lowest Percentage uplift) was the ‘lower to middle’ housing market. Therefore, interestingly, if we applied the best percentage uplift figure (i.e. from the ‘middle’ market percentage uplift), to the ‘lower to middle’ 1995 housing market figure, the 2017 figure of £98,000, would have been £106,442 instead – quite a difference you must agree?

Now, I have specifically not mentioned the upper reaches of the Huddersfield housing market for several reasons.  Firstly, the lower or middle market is where most of the buy to let investment landlords buy their property and where the majority of property transactions take place. Secondly, due to the unique and distinctive nature of Huddersfield’s up-market property scene (because every property is different and they don’t tend to sell as often as the lower to middle market), it is much more difficult to calculate what changes have occurred to property prices in that part of the Huddersfield property market - looking at the stats for the up-market Huddersfield property market from Land Registry, only 26 properties in Huddersfield (and a 5 mile radius around it) have sold for £1,250,000 or more since 1997.

So, what should every homeowner and buy to let landlord take from the information that there are many micro-property markets? Well, when you realise there isn’t just one Huddersfield Property Market, but many Huddersfield “micro-property markets”, you can spot trends and bag yourself some potential bargains. Even in this market, I have spotted a number of bargains over the last few months that I have shared in my Property Blog and to my landlord database, especially in the ‘lower’ and ‘lower/middle’ market. If you want to be kept informed of those buy to let bargains, have a look at my blog https://huddersfieldproperty.blogspot.co.uk/  . it’s free to do so and I’m sure you wouldn’t want to miss out – would you?

I would love to know if you have spotted any micro-property markets in Huddersfield.

Supply and Demand Issues mean Huddersfield Property Values Rise by 3.6% in the Last 12 Months

The most recent set of data from the Land Registry has stated that property values in Huddersfield and the surrounding area were 3.61% higher than 12 months ago and 10% higher than January 2015.

Despite the uncertainty over Brexit as Huddersfield (and most of the UK’s) property values continue their medium and long-term upward trajectory. As economics is about supply and demand, the story behind the Huddersfield property market can also be seen from those two sides of the story.

Looking at the supply issues of the Huddersfield property market, putting aside the short-term dearth of property on the market, one of the main reasons of this sustained house price growth has been down to of the lack of building new homes.

The draconian planning laws, that over the last 70 years (starting with The Town and Country Planning Act 1947) has meant the amount of land built on in the UK today, only stands at 1.8% (no, that’s not a typo – its one point eight percent) and that is made up of 1.1% with residential property and 0.7% for commercial property. Now I am not advocating building modern ugly carbuncles and high-rise flats in the Cotswolds, nor blot the landscape with the building of massive out of place ugly 1,000 home housing estates around the beautiful countryside of such villages as Denby Dale, Farnley Tyas and Netherthong.

The facts are, with the restrictions on building homes for people to live in, because of these 70-year-old restrictive planning regulations, homes that the youngsters of Huddersfield badly need, aren’t being built. Adding fuel to that fire, there has been a large dose of nimby-ism and landowners deliberately sitting on land, which has kept land values high and from that keeps house prices high.

Looking at the demand side of the equation, one might have thought property values would drop because of Brexit and buyers uncertainty. However, certain commenters now believe property values might rise because of Brexit. Many people are risk adverse, especially with their hard-earned savings. The stock market is at an all-time high (ready to pop again?) and many people don’t trust the money markets. The thing about property is its tangible, bricks and mortar, you can touch it and you can easily understand it.  

The Brits have historically put their faith in bricks and mortar, which they expect to rise in value, in numerical terms, at least. Nationally, the value of property has risen by 635.4% since 1984 whilst the stock market has risen by a very similar 593.1%. However, the stock market has had a roller coaster of a ride to get to those figures. For example, in the dot com bubble of the early 2000’s, the FTSE100 dropped 126.3% in two years and it dropped again by 44.6% in 9 months in 2007… the worst drop Huddersfield saw in property values was just 17.17% in the 2008/9 credit crunch.

Despite the slowdown in the rate of annual property value growth in Huddersfield to the current 3.61%, from the heady days of 6.3% annual increases seen in mid 2014, it can be argued the headline rate of Huddersfield property price inflation is holding up well, especially with the squeeze on real incomes, new taxation rules for landlords and the slight ambiguity around Brexit. With mortgage rates at an all-time low and tumbling unemployment, all these factors are largely continuing to help support property values in Huddersfield (and the UK).

Huddersfield Homeowners and their £2.06 billion Debt

Over the last 12 months, the UK has decided to leave the EU, have a General Election with a result that didn’t go to plan for Mrs May and to add insult to injury, our American cousins elected Donald Trump as the 45th President of the United States. It could be said this should have caused some unnecessary unpredictability into the UK property market.

The reality is that the housing and mortgage market (for the time being) has shown a noteworthy resilience. Indeed on the back of the Monetary Policy pursued by the Bank of England there has been a notable improvement of macro-economic conditions! In July for example it was announced that we are witness to the lowest levels of unemployment for nearly 50 years. Furthermore, despite the UK construction industry building 21% more properties than same time the previous year, there has still been a disproportionate increase in demand for housing, particularly in the most thriving areas of the Country. Repossessions too are also at an all-time low at 3,985 for the last Quarter (Q1 2017) from a high of 29,145 in Q1 2009. All these things have resulted in...

Property values in Huddersfield according to the

Land Registry are 3.61% higher than a year ago

So, what does all this mean for the homeowners and landlords of Huddersfield, especially in relation to property prices moving forward?

One vital bellwether of the property market (and property values) is the mortgage market. The UK mortgage market is worth £961,653,701,493 (that’s £961bn) and it representative of 13,314,512 mortgages (interestingly, the UK’s mortgage market is the largest in Europe in terms of amount lent per year and the total value of outstanding loans). Uncertainty causes banks to stop lending – look what happened in the credit crunch and that seriously affects property prices.

Roll the clock back to 2007, and nobody had heard of the term ‘credit crunch’, but now the expression has entered our everyday language.  It took a few months throughout the autumn of 2007, before the crunch started to hit the Huddersfield property market, but in late 2007, and for the following year and half, Huddersfield property values dropped each month like the notorious heavy lead balloon, meaning …

The credit crunch caused Huddersfield property values to drop by 17.1%

Under the sustained pressure of the Credit Crunch, the Bank of England realised that the UK economy was stalling in the early autumn of 2008. Loan book lending (sub-prime phenomenon) in the US and across the world was the trigger for this pressure. In a bid to stimulate the British economy there were six successive interest rates drops between October 2008 and March 2009; this resulted in interest rates falling from 5% to 0.5%!

Thankfully, after a period of stagnation, the Huddersfield property market started to recover slowly in 2011 as certainty returned to the economy as a whole and Huddersfield property values really took off in 2013 as the economy sped upwards. Thankfully, the ‘fire’ was taken out of the property market in Spring 2015 (otherwise we could have had another boom and bust scenario like we had in the 1960’s, 70’s and 80’s), with new mortgage lending rules. Throughout 2016, we saw a return to more realistic and stable medium term property price growth. Interestingly, property prices recovered in Huddersfield from the post Credit Crunch 2009 dip and are now 17.1% higher than they were in 2009.

Now, as we enter the summer of 2017, with the Conservatives having been re-elected on their slender majority, the Huddersfield property market has recouped its composure and in fact, there has been some aggressive competition among mortgage lenders, which has driven mortgage rates down to record lows. This is good news for Huddersfield homeowners and landlords, over the last few months a mortgage price war has broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.  For example, last month, HSBC launched a 1.69% five-year fixed mortgage!

Interestingly, according to the Council of Mortgage Lenders, the level of mortgage lending had soared to an all-time high in the UK. 

In the Huddersfield postcodes of HD1 to HD5, HD7 and HD8, if you added up everyone’s mortgage, it would total £2,064,025,515!

Since 1977, the average Bank of England interest rate has been 6.65%, making the current 323 year all time low rate of 0.25% very low indeed. Thankfully, the proportion of borrowers fixing their mortgage rate has gone from 31.52% in the autumn of 2012 to the current 59.3%. If you haven’t fixed – maybe you should follow the majority?

In my modest opinion, especially if things do get a little rocky and uncertainty seeps back in the coming years (and nobody knows what will happen on that front), one thing I know is for certain, interest rates can only go one way from their 300 year ultra 0.25% low level ... and that is why I consider it important to highlight this to all the homeowners and landlords of Huddersfield. Maybe, just maybe, you might want to consider taking some advice from a qualified mortgage adviser? There are plenty of them in Huddersfield.

Huddersfield Property Market and Mysterious Politics of the General Election

Huddersfield Property Market and Mysterious Politics of the General Election

As the dust starts to settle on the various unread General Election party manifestos, with their ‘bran-bucket’ made up numbers, life goes back to normal as political rhetoric on social media is replaced with pictures of cats and people’s lunch.  Joking aside though, all the political parties promised so much on the housing front in their manifestos, should they be elected at the General Election.  In hindsight, irrespective of which party, they seldom deliver on those promises.

Housing has always been the Cinderella issue at General Elections.  Policing, NHS, Education, Tax and Pensions etc., are always headline grabbing stuff and always seem to go ‘the ball’. However, housing, which affects all our lives, always seems to get left behind and forgotten.

Nonetheless, the way the politicians act on housing can have a fundamental effect on the wellbeing of the UK plc and the nation as a whole.

One policy that comes to mind is Margaret Thatcher’s Council House sell off in the 1980’s, when around 1.4m council houses went from public ownership to private ownership.  It was a great vote winner at the time (it helped her win three General Elections in a row) but it has meant the current generation of 20 somethings in Huddersfield (and elsewhere in the Country) don’t have that option of going into a council house.  This has been a huge contributing factor in the rise of the private renting and buy to let in Huddersfield over the last 15 years.

Nevertheless, looking back to the start of the Millennium, Labour set the national target for new house building at 200,000 new homes a year (and at one point that increased to 240,000 under Gordon Brown for a couple of years).  In terms of what was actually built, the figures did rise in the mid Noughties from 186,000 properties built in 2004 to an impressive 224,000 in 2007 (the highest since the early 1980’s) as the economy grew.

Then the Credit Crunch hit.  It is interesting, that the 2010 Cameron/Clegg government did things a little differently.  The fallout of the Credit Crunch meant a lot less homes were built, so instead of tackling that head on, the coalition side-stepped the target of the number of new homes to build and offered a £400m fund to help kick start the housing market (a figure that was a drop in the ocean when you consider an average UK property was worth around £230,000 in 2010).  The number of new houses being completed dipped from 146,800 in 2011 to 135,500 the subsequent year.

So, one might ask exactly how many new homes do we need to build per year?  It is commonly accepted that not enough new properties are being built to meet the rising need for homes to live in.  A report by the Government in 2016, showed that on average 210,000 net additional households will be formed each year) up to 2039 (through increased birth rates, immigration, people living longer, lifestyle (i.e. divorce) and people living by themselves more than 30 years ago).  In 2016, only 140,600 homes were built ... simply not enough!

Looking at the numbers locally in Huddersfield and the surrounding area, it is obvious to me, that we as an area, are not pulling our weight either when it comes to building new homes. In the 12 months up to the end of Q1 2017, only 550 properties were built in the Metropolitan Borough of Kirklees Council area.  Go back to 2007, that figure was 830, 10 years before that in 1997, 1,030 new homes and further back to 1988, 1,010 new homes were built.

Who knows if Teresa May’s Government will last the five years?  She will think she has bigger fish to fry with Brexit to get bogged down with housing issues.  But let me leave you with one final thought.

The conceivable rewards in providing a place to live for the public on a massive house building programme can be enormous, as previous Tory PM’s have found out.  Winston Churchill in 1951, asked his Minister for Housing (Harold Macmillan) if he could guarantee the construction of 300,000 new properties a year, he was notoriously told: “It is a gamble—it will make or mar your political career, but every humble home will bless your name if you succeed.”

Isn’t it interesting, that the Tories remained in power until 1964!  Mrs May will have to work out if she wants to be the heiress to Harold Macmillan or David Cameron?

Huddersfield’s 5,849 Mortgage Time-Bombs?

Huddersfield’s 5,849 Mortgage Time-Bombs?

According to my research, of the 69,144 properties in Huddersfield, 27,077 of those properties have mortgages on them. 84.2% of those mortgaged properties are made up of owner-occupiers and the rest are buy to let landlords (with a mortgage).

… but this is the concerning part .. 5,849 of those Huddersfield mortgages are interest only. My research also shows that, each year between 2017 and 2022, 70 of those households with interest only mortgages will mature, and of those, 18 households a year will either have a shortfall or no way of paying the mortgage off. Now that might not sound a lot – but it is still someone’s home that is potentially at risk.

Theoretically this is an enormous problem for anyone in this situation as their home is at risk of repossession if they don’t have some means to repay these mortgages at the end of the term (the typical term being 25 to 35 years). Banks and Building Societies are under no obligation to lengthen the term of the mortgage and, when deciding whether they are prepared to do so or not, will look at it in the same way as someone coming to them for a new mortgage.

Back in the 1970’s and 1980’s, when endowment mortgages were all the rage, having an endowment meant you were taking out an interest only mortgage and then paying into an endowment policy which would pay the mortgage off (plus hopefully leave some profit) at the end of the 25/35-year term. There were advantages to that type of mortgage as the monthly repayments were lower than with a traditional capital repayment and interest mortgage. Only the interest, rather than any capital, is paid to the mortgage company - but the full debt must be cleared at the end of the 25/35-year term.

Historically plenty of Huddersfield homeowners bought an endowment policy to run alongside their interest only mortgage. However, because the endowment policy was a stock market linked investment plan and the stock market poorly performed between 1999 and 2003 (when the FTSE dropped 49.72%), the endowments of many of these homeowners didn’t cover the shortfall. Indeed, it left them significantly in debt!

Nonetheless, in the mid 2000’s, when the word endowment had become a dirty word, the banks still sold ‘interest only’ mortgages, but this time with no savings plan, endowment or investment product to pay the mortgage off at the end of the term. It was a case of ‘we’ll sort that nearer the time’ as property prices were on the rampage in an upwards direction!

Thankfully, the proportion of interest only mortgages sold started to decline after the Credit Crunch, as you can see looking at the graph below, from a peak of 43.81% of all mortgages to the current 8.71%.

Increasing the length of the mortgage to obtain more time to raise the money has gradually become more difficult since the introduction of stricter lending criteria in 2014, with many mature borrowers considered too old for a mortgage extension.

Huddersfield people who took out interest only mortgages years ago and don’t have a strategy to pay back the mortgage face a ticking time bomb. It would either be a choice of hastily scraping the money together to pay off their mortgage, selling their property or the possibility of repossession (which to be frank is a disturbing prospect).

I want to stress to all existing and future homeowners who use mortgages to go in to them with your eyes open. You must understand, whilst the banks and building societies could do more to help, you too have personal responsibility in understanding what you are signing yourself up to. It’s not just the monthly repayments, but the whole picture in the short and long term. Many of you reading my blog ask why I say these things. I want to share my thoughts and opinions on the real issues affecting the Huddersfield property market, warts and all. If you want fluffy clouds and rose tinted glasses articles – then my articles are not for you. However, if you want someone to tell you the real story about the Huddersfield property market, be it good, bad or indifferent, then maybe you should start reading my blog regularly.

For more thoughts on the Huddersfield Property Market – visit the Huddersfield Property Blog https://huddersfieldproperty.blogspot.co.uk/