Good (and Bad!) Reasons to be a Landlord

 The buy-to-let market in Huddersfield is about to enter a challenging 12 to 24 months. Yet by looking back at the last recession and what is happening now, there are vital lessons all Huddersfield landlords can learn to protect themselves, and in fact create opportunities for themselves both in the short term and ultimately the longer term. For the purposes of this article, I would like to split these and look at the challenges and then the opportunities.

 

So, let’s consider the challenges ahead for Huddersfield landlords…

 

Overall, the impending rise in unemployment stands to encumber tenants’ ability to pay their rent, the rents being achieved and the possible Capital Gains Tax changes might mean an increase in tax paid by Huddersfield landlords when they come to sell their Huddersfield buy-to-let properties.

 

Let’s look at these three points in greater detail. Firstly looking at your Huddersfield tenants ability to pay the rent; the Furlough Scheme certainly did help soften the blow, helping out 8.9 million people in May (out of 30.5 million who were eligible for it) and at the last count in early August, this thankfully had reduced to 5.3 million people (meaning 15.86% of workers are still on furlough). However, it cannot be denied the economic fallout from Coronavirus has already placed some tenants under economic strain. As the Furlough Scheme finishes at the end of October, commentators are suggesting the number of tenants either incapable of paying their rent, or requesting a reduction in their rent, is predicted to increase as we go into autumn and early winter.

 

The ultimate sanction against non-payment of rent is legal proceedings although guidance from the Government has recommended that landlords and tenants should work together and deplete all possible options before starting eviction proceedings. Yet many Huddersfield landlords are feeling the pressure as many mortgage payment holidays will be coming to a close at the end of September. Some Huddersfield landlords can indisputably see that their tenants are finding it tough and they are willing to work with them, but they can only make allowances go so far.  Landlords aren’t running a charity and I would stress to any tenant that finds themselves being made unemployed in the months to come to apply for Universal Credit as soon as possible, which should help with their rental payments. With regard to the eviction process, the Government have changed the rules a number of times in the last few months, so if you want an update, don’t hesitate to contact me, whether you are client or not – I am just happy to help.

 

Secondly, it’s interesting in central London, there has been a glut of Airbnb properties coming onto the market because of a lack of tourists to rent them on a short-term let. A greater supply of rental properties has meant a downward pressure on rents in London of 2.1%. I don’t think this is so much of an issue in Huddersfield as…

 

Huddersfield rents are 3.49% higher year on year

 

Thirdly, there is talk that the Chancellor, Rishi Sunak, is looking at changing the Capital Gains Taxation rules.  As property is the biggest asset that most people own, this is also reason for concern for Huddersfield buy-to-let landlords. Currently, Capital Gains Tax on sales of buy-to-let property is levied at 18% for basic income tax rate payers and 28% for higher rate income taxpayers. There is talk the capital gains made on the landlord selling their buy-to-let property could be taxed at the landlord’s income tax rate.

 

Yet before you all start selling your Huddersfield portfolios before November’s budget, any changes in Capital Gains Tax would be immediate. That means to ensure you didn’t come foul of the potential rise in the tax, you would have to have to sell your Huddersfield portfolio at a ‘fire sale price’ in days and have a solicitor that could do the conveyancing in 3 weeks (whilst it is taking 19 weeks on average for buyers to sort their legal work out) and the buyer be a cash buyer because banks are taking months, not weeks to sort finance. This is just something we are going to have to take on the chin!

 

Let us now consider the opportunities ahead for you Huddersfield landlords…

 

As the country officially entered its first recession since 2009, uncertainty in any markets (be it property or stocks and shares, etc.) causes investors to vacillate over whether or not to take the jump. Nevertheless, there are numerous indicators that appear to show this is, indeed, a good time to either become a buy-to-let Huddersfield landlord or expand one’s property empire and buy more property ... let me explain.

 

Firstly, assets (such as gold and stocks and shares) are great, yet if they aren’t producing income and cash – that doesn’t pay for your day-to-day living. Gold doesn’t create any income and many FTSE companies won’t be paying dividends for a while. Government Bonds are currently earning their investors 0.2% (no - that isn’t a typo) and the best savings accounts are achieving 1.1% with a 120-day notice period, so where are you going to invest your hard-earned money?

 

The average Huddersfield buy-to-let property

will earn a monthly return of 6.96%

 

Of course, deciding on the right Huddersfield property is crucial to get a good rental income and return. I have seen so many Huddersfield first-time landlords buy with their heart and not their head. Buying your own home is more heart than head but buy-to-let is a completely different kettle of fish. There is the inverse relationship between income (rent) and capital growth (how much it will go up in value in the future) i.e. as one goes up, the other tends to go down – so getting the balance for your needs is vital. Again, I can advise on that for you.

 

Secondly, with the stamp duty holiday and the pent-up demand for people wanting to move home in Huddersfield (discussed many times recently in this blog), the Huddersfield property market is certainly very buoyant at the moment, yet even the most optimistic agents say it cannot last. Whether the market goes pop or has a slow and steady puncture, the market will cool in 2021. The recession will mean some people are less able to afford a mortgage. This means that if Huddersfield property values do ease off in 2021, you may be able to get a great buy-to-let deal if you are planning on becoming a Huddersfield landlord or expand your property empire as an existing landlord.

 

Also, if the property market does find property prices realign to a new normal in 2021/2, house sellers may find it difficult to get a good price on their Huddersfield home during a recession, meaning many house sellers may be more agreeable to sell their property at a lower price.

 

Third, if people aren’t buying, they still need a roof over their head and the council aren’t building any council houses, meaning the private sector will need to take up the slack.

 

Rightmove reported tenant demand grew by a third in

May 2020 when compared to the same month in 2019

 

Therefore, if you are still unsure about becoming a Huddersfield landlord, knowing that more Huddersfield people want to rent should help you feel more comfortable as the risk of ‘running out’ of renters interested in your Huddersfield property is minimal. Yet again, please don’t go buying any old Huddersfield property, as it’s fundamental that you make a good investment from the start in order to see a good return on your investment.

 

If Huddersfield property values do fall in 2021 (as in 2009),

tenant demand for Huddersfield property will only go up

 

Fourth, the Government reduced stamp duty with the sole aim to benefit the property market. The purchase needs to complete by the end of March 2021, which means you will need to have bought the property by November at the latest (as obtaining finance and legal work is taking at least 19 weeks). A word to the wise though, that whilst the saving in Stamp Duty delivers some up-front saving for those buying a buy a let property, don’t get carried away and use that saving in the purchase price you pay. Certain sectors of the Huddersfield property market are seeing some very inflated prices, meaning if you go into battle for a show home quality semi-detached house within a stone’s throw of the best school, you will be fighting against buyers who want it for themselves and are prepared to pay top dollar for it, meaning some landlords could end up paying more for a property. My advice, if you want to save on the Stamp Duty, there are bargains to be had – you just have to know what you are looking for (again, as mentioned in point 1 – I am here to help on that whether you are a client of mine or not). The other option would be ‘just hold back’ until after 31 March 2021, when Huddersfield property prices could ease.

 

Fifth, reports that the mortgage lenders are imposing stricter conditions are true, yet even during Covid, many lenders are seeing buy-to-let landlords as a safer option to lend their money to. In June alone, the number of buy-to-let mortgage products rose by 19.2% (to just over 1,700) meaning if you have a decent deposit of 30% upwards, you are likely to find something that fits your needs (at the time of writing this article, the Birmingham Midshires had a buy-to-let 5-year fixed rate mortgage at 1.94% and Santander at 2.04% ... this is cheap money in anyone’s language). Mortgage rates are ever becoming more economical, which is a great motivation for anyone wanting to get a foot on the Huddersfield buy-to-let property ladder.

 

Finally, words cannot portray the feeling of being able to see and touch one’s investment like the sensation of bricks and mortar. Buy-to-let investment has to be seen as a long-term investment yet, for many, that is a source of financial security. Of course property values might go south next year (but they might not!), whereas there may be intervals where it’s more problematic to sell because property values will be too low, as is normally the situation throughout a recession, there will also be times where Huddersfield landlords will make a nice profit when selling their buy-to-let homes. Like all things in life - it’s all about the timing.

 

Huddersfield property values are 181% higher than 20 years ago

 

If you’re looking to invest but are not interested in stocks and shares (and you understand that your money may be tied up for a while) then the Huddersfield buy-to-let market could be for you.

 

To conclude, buying the right Huddersfield property at the right price to start with, presenting the property in the best way to get the best tenant, fully checking out and referencing the tenant to ensure they have a good track record of being a good tenant that doesn’t trash the property and has always paid the rent on time in the past and then finally, managing the property to ensure your property complies with the 200+ legislations and regulations of rental property, so you can sleep well at night … all to ensure the property is returned at the end of the tenancy to you in good order is what nirvana looks like.

 

Of course, buy-to-let does come with some risks and challenges, but it’s all about mitigating those risks. Also, there is no denying that buy-to-let also comes with a lot of opportunities as well. If you are a landlord with another agent or even a Huddersfield landlord that manages the property themselves, feel free to drop me a message, email or pick up the phone and let’s chat about your personal goals when it comes to buy-to-let … because what have you got to lose? Surely 15/20 minutes of your time to get great insight and inside track is worth it?

 

Remember, the choice is yours!

The Huddersfield Property Market Post-Lockdown - the First 100 Days

 With only around 1 in 4 Huddersfield house sellers actually selling their home in the last month, Huddersfield sellers and buyers will need to continue to be pragmatic if the surprisingly strong current levels of activity in the Huddersfield property market are to be sustained.

 

To start, we had the once in a lifetime event of the credit crunch in 2008, we then had another once in a lifetime event with the Brexit vote in 2016 and now the mother of all ‘once in a lifetime’ events, Coronavirus in 2020 – three once in a lifetime events in the space of 3 Olympic Games!

 

The doom-mongers forecast that the British property market would drop like a lead balloon  on the scale of the 1989 housing crash (where property values dropped by 30.87% in a couple of years) but would be nothing compared to the tsunami that was Covid. Yet in the first 100 days of the property market coming out of lockdown, behavioural and economic changes mean that many Huddersfield homebuyers are now even more dedicated to moving home and the Huddersfield property market is doing quite well.

 

Going into lockdown, the effect on activity in the Huddersfield property market during those two months was expectable and predictable as it was placed in suspended animation during April and May. When the Huddersfield property market re-opened in mid-May, nobody predicted what happened next. Of course, many of us in the property industry estimated some release of pent-up demand from the Boris Bounce, yet nobody anticipated such a ricochet in activity in the Huddersfield property market.

 

This is particularly interesting when one considers GDP dropped by 20.4% in Q2 2020 (fascinating when compared to notable historic times when it dropped by 13.8% in WW2 and 16.7% in WW1), yet amidst the largest contraction in the UK economy ever in a single quarter, what wasn’t expected was an increase of potential property buyers and sellers wanting to move post-lockdown.

 

Some have cited this boost to the property market on a number of factors. Firstly, we have had the Stamp Duty Holiday, others have pointed at the never seen before 0.1% Bank of England base rates making mortgages cheap, then we had the furlough scheme which protected so many jobs and finally, the pent-up demand from the Boris Bounce.

 

Yet, when one actually talks with Huddersfield buyers and sellers, whilst all of them cite one or two of the above reasons, all of them mention and talk about how the lockdown has made them re-evaluate and reconsider how they want to live, their work-life balance and where they want to live. This is also reflected with tenants changing their requirements when looking for a property to rent (so Huddersfield landlords – be aware of this).

 

Demand for apartments in the centre of Huddersfield has eased off, whilst demand for property with a good-sized garden or other outside space has increased. One question we get asked all the time is also the broadband speeds, although they are quite decent in Huddersfield (the average broadband in our local Council area being 42.4 Mbps download and 9.3 Mbps upload).

 

So, with record numbers of Huddersfield properties coming on to the market – is it boom time for Huddersfield homeowners?

 

Of the 566 properties that have come onto the market in Huddersfield over the last month, only 137 of them have agreed a sale (a percentage of 24.2%)

 

That means around 3 in 4 Huddersfield people that have placed their property onto the market have not found a buyer yet.

 

Yes, the Huddersfield property market is good, yet the number of people who have placed their property on the market has also gone up. Huddersfield estate agents have never been so busy putting property on the market and I feel sorry for the chap who is putting up all the for-sale boards – his wife hasn’t seen him in daylight for weeks!

 

But that does mean you are in competition with so many other properties on the market (the number of properties coming on to the market typically at this time of the year is about a third to half less). The Stamp Duty boost ends in March 2021, so that means you need to have found a buyer by November at the very latest. By overegging your asking price, to test the market, might mean you will lose out on this hiatus and could end up missing the boat!

 

The prices being achieved for the Huddersfield properties that have been selling have been fair and realistic and have stood up much better than many were originally predicting.

 

Yet as the country looks forward, given the ambiguous nature of the outlook for the British economy and the possibility that Covid-19 may be with us for a little while yet, I must implore Huddersfield property sellers to be realistic with their asking price so a greater number of you who want to make the move, are able to do so.

Huddersfield Millennials Moving Back in with Mum & Dad?

Roll the clock back 20 years and any self-respecting late 20/early 30 something would never say on their first date that they lived with their mum and dad. It was seen as a sign of immaturity being tied to your mother’s apron strings as a failure to leave the family home. Yet over these last two decades, the age of leaving home has been increasing steadily from 20 years and 11 months in the late 1990’s to 22 years and 7 months today.

 

However, as with all the stats, the devil is in the detail. Although the age of leaving home has only risen by 8% between 1997 and today, those that didn’t leave home in their early 20’s tended to stay much, much longer.

 

In 1997, 11.26% of 25yo to 34yo still lived at home with their parents,

yet last year that had risen to 15.74%, an increase of 391,000

‘stay at home’ Millennials

 

However, before we deride these Millennials for still being tied to their mother’s apron strings, I would say those very same Millennials (the mid 20’s to 30-year olds) have been pragmatic, being attracted to sacrificing independence in order to achieve their long-term life goals as they have seen rents rise and an inability to save for the mortgage deposit. All of this has seen the first-time buyer levels in this millennial age range rise for the last three years … so good news for everyone!

 

However, is all that about to change?

 

Just as mum and dads in Huddersfield had thought their late 20 something/early 30 something offspring had flown the nest, Covid-19 has blown some Huddersfield ‘chickadees’ back into the nest. Back in March, the lockdown saw many Millennials flee the big UK cities, with their constrained and poky shared HMO’s and flat shares, swapping their city centre private rented home for their parents’ Huddersfield home.

 

Yet with lockdown lessening, it isn’t just remote workers who are unenthusiastic and disinclined to return to the big cities (fearful of a second lockdown) — many of these Coronavirus blow-ins are deciding to stay put too! A recent YouGov poll asked Millennials of private rented homes what their plans were and 1 in 6 tenants planned to hand their notice in on their rented home and fly back to the nest of mum and dad. The advantages are quite plain, especially as it could enable them to save for a deposit to buy their future home.

 

There are 69,144 households in Huddersfield, made up of 22,989

single person households and 40,902 family households

(the remainder being made up of shared houses etc.)

 

 

Yet how many of those Huddersfield family households had non-dependent children before Covid-19?

 

6,001 Huddersfield households have children

that haven’t flown the nest

 

That’s 14.67% of Huddersfield families whose kids are still to leave home … and it’s only going to get worse!

 

So, what does this mean for Huddersfield homeowners and Huddersfield landlords?

 

It will mean that Huddersfield parents and their children will get to know each other better, build stronger relationships and it will enable their children, if they are wise, to save for their deposit for their first home purchase - who knows maybe in Huddersfield, as working from home could become the norm.

 

Also, with remote working, many tenants are looking for properties with bigger gardens which could translate into greater demand for property with bigger gardens? It will also change the property needs of those Huddersfield parents and potentially could mean instead of those parents moving down market, they could end up staying longer or moving up market?

 

Now of course these polls could be a load of hot air? What I do know is that this thing has not played out yet and only time will tell if this will make a concrete change to the way people live, rent and buy property.

 

These are interesting times and thank you for reading this. Do let me know your thoughts on this matter.

The 7,402 ‘Trapped Landlords’ of Huddersfield

Going into lockdown in March, the Government proclaimed a ban on tenant evictions, pledging that no tenant in a private rented home, who had lost their wages due to Covid-19 would be kicked out of their private rented home until the late summer. Fast forward to August and the press were being briefed as late as Wednesday 19^th August that this freeze in evictions in England and Wales would cease on the 23^rd August. That was until just after 4pm Friday 21^st August when Mr Jenrick, the Housing Minister, announced that the eviction ban would be extended for a further four weeks and also buy to let landlords must now give their tenants six months notice to gain possession.

 

Cue crocodile tears for all the 7,402 Huddersfield landlords

 

Not so ‘snappy’ with piping your eye there. I know many Huddersfield landlords became landlords between 2000 and 2009 because they preferred bricks and mortar to investing in the stock market or gilts/bonds market. All they were looking for was a small pension income to top up their meagre state pension. Not all Huddersfield landlords are akin to the 21st Century Rising Damp version of Leonard Rossiter with his ‘Rigsby-esqe’ or even ‘Rach-manism’ wicked landlord ways. Official estimates suggest there are 1.8m to 2.1m landlords in the UK, the vast majority doing the right thing by their tenants, many of whom have helped their Huddersfield tenants in financial trouble during Covid-19 by acquiescing to short-term rent reductions or rent-payment holidays.

Also, many Huddersfield landlords have mortgages (in fact, if we added all the UK buy to let landlord’s mortgages, they would add up to £216.65 billion). The Government and the Bank of England have applied political influence on the mortgage companies to be a little more flexible and sympathetic on landlord’s mortgage interest payments, yet the mortgage interest is still adding up. The issue is, some tenants are in arrears with their rent, meaning landlords aren’t receiving their rent, which means many buy to let mortgages aren’t being paid either.

 

So, how many tenants are in arrears? The National Residential Landlords Association stated that just 3% of landlords recently surveyed reported tenants are in arrears. This was backed up recently when Goodlord stated …

 

3.72% of tenancies in the UK are in arrears,

 

These are only slightly above the pre-Covid arrears levels, yet still a strain for the landlords involved. Also, the two-month notice period of the section 21 Notice has been extended to six months, meaning it will be March before any tenants are made to leave, even if the notice was issued now.

 

So, does this leave Huddersfield landlords trapped?

 

With regard to the arrears, only 1 in 17 landlords rent their property through a limited company, meaning the rest (i.e. the vast majority) rent their property as a person, thus giving themselves unlimited personal liability should their rental portfolio fail (i.e. the mortgage company could make a claim on the landlords own assets, including their main residence, if the property was repossessed and the shortfall wasn’t made up). Also, if the building society’s and Banks turn against the Government advice and are too lenient with landlords with buy to let mortgages, there could be situations where the rental properties are repossessed, meaning the tenant will be made homeless.

 

I am particularly concerned about the fate of the

2,080 self-managing Huddersfield landlords (i.e. they don’t use an agent)

 

They should seriously consider taking out rent guarantee insurance to protect themselves against any potential defaulting tenants (so many don’t). Reasonably priced rent guarantee insurance products, even on existing tenancies are still available to landlords via agents, even in these Covid-19 times (whether you are a client of mine or not do not hesitate to pick up the phone and have a chat or send me an email). Whilst the policies aren’t inexpensive – they do give you peace of mind with the rental payments.

 

One thing that this does also remind me of is the 2008 Credit Crunch. There were an awful lot of Huddersfield homeowners who were unable to sell their home in 2008/9, so they converted their Huddersfield property into a buy to let investment. There are going to be an awful lot of Huddersfield landlords who will also want to sell in the next six to nine months, yet are unable to do so until the middle of next year without having to take a hit on the value of their home. For those Huddersfield landlords that can relate to that, maybe we should chat to consider your options so you can mitigate any losses?

 

It seems Huddersfield landlords have been used to saving the Government from a PR disaster of homeless tenants on the streets at Christmas, the least we should do in the country is stop disparaging landlords and lift them up from their pariah status.

Huddersfield landlords are housing 28,364 Huddersfield

people in private rented accommodation…

 

… and so it is my opinion that the contributions made by these Huddersfield landlords should be recognised. My fear is always of a danger of a widening schism between the landlords and tenants. Truth be told, both need each other, and I hope the Government extend help to landlords as they have with tenants, otherwise the Government won’t have any homes to house the British people if all the landlords decide to sell up. It is especially important that the supply of private properties doesn’t drop in Huddersfield going forward when you consider…

 

Huddersfield needs an additional 5,560 private rental homes by 2029

 

In the meantime, the Government have bigger fish to fry sorting out the economy as a whole, so if you are a self-managing landlord or even a landlord with another agent in Huddersfield, feel free to pick up the phone or make contact with me and we can discuss your options without any obligation. There is no need to feel trapped, there are options for you and it is better to consider them now - set the foundations and motions going in the right direction promptly before it becomes a bigger issue in the future.