The 2020 Review of the Huddersfield Property Market

 

Looking back at the Huddersfield property market for 2020, it can certainly be seen as a frenetic game of two halves, albeit with a very long half time in the spring. Between the General Election in mid-December and Christmas, many Huddersfield agents saw an unusually higher uplift in activity in the property market just as we were getting ready for Christmas 2019. Yet once the New Year festivities were out of the way, that pre-Christmas uplift in the local property market was nothing when compared to the bang on Monday 6^th January 2020 with the fabled ‘Boris Bounce’ of the Huddersfield property market. January, February and most of March were amazing months, with the pent up demand from people wanting to move from the Brexit uncertainty of 2018/9 being released in the first few months of 2020.

 

The pandemic hit mid-March, and the Huddersfield property market was put on ice for nearly three months (as was almost everyone else’s lives). Yet at the end of spring, the property market was one of the first sectors of the economy to be re-opened. Every economist predicted house price drops in the order of 10% in the best-case scenario and 25% in the worst yet nothing could be further from the truth.

 

When the lockdown restrictions were lifted from the property market, those three months allowed Huddersfield homeowners to re-evaluate their relationships with their homes. The true worth of an extra bedroom (for an office) became priceless, as people working from home were having to take calls and work from the dining room table. Huddersfield properties with gardens and/or close to green spaces all of a sudden became even more desirable. More fuel was put on the fire of the Huddersfield property market with the introduction of the Stamp Duty Holiday, meaning buyers could save thousands of pounds in tax if they moved before the end of March 2021. This stoked the local property market and now …

 

Property values in Huddersfield are set at 4.3% higher today compared to a year ago.

 

The fallout of that increased demand for a new home meant those Huddersfield  properties on the market coming out of lockdown in early summer with those extra rooms and gardens were snapped up in days for ‘full’ price. Huddersfield buyers were having to spend their Stamp Duty savings on paying top dollar for the home of their dreams. Yet the increased number of properties coming onto the market in the late Summer quenched a lot of that demand and the prices being achieved became a little more reasonable and realistic. This increased the number of properties sold (stc), so much so that, nationally, almost two thirds more homes have been sold (stc) than would be expected at this time of year!

 

However, as we all know, just because a property is sold (stc), it doesn’t mean the property is actually sold. The number of people who have moved home in the last 12 months in Huddersfield, is as you would expect, much lower. Over the last 10 years, on average 2,370 Huddersfield homes have changed hands per year, compared to only 1,216 Huddersfield homes in the last 12 months.

 

So, what is a Huddersfield property worth today? Drilling down to the four types of homes locally, some interesting numbers appear. Looking at the table, you can see what the average property types are worth locally, and within each type, the average price paid in the last 12 months. (So, if the average price paid for the last 12 months is higher than the overall average, that means more higher priced property in that type has sold in the last year compared to the overall average – and vice versa). 

 

	Average Overall Value Today	Average Price Paid in the Last Year
Huddersfield Detached	£293,210	£287,340
Huddersfield Semi-Detached	£160,600	£174,940
Huddersfield Town House/Terraced	£113,440	£121,040
Huddersfield Apartments/Flats	£129,770	£114,850

 

Of course, these are overall average values. To give you an idea what Huddersfield properties are selling for by their square footage, these are those averages …

 

	Average Value per sq. ft. (internal)
Huddersfield Detached	£187.11
Huddersfield Semi-Detached	£170.98
Huddersfield Town House/Terraced	£135.80
Huddersfield Apartments/Flats	£152.95

 

So, what about 2021? Well normally when the country’s GDP drops like a stone (as it did in the Summer of 2020), the property market follows in unison. Yet as the economy went south, the house price growth and activity in the property market went north. This would appear to be a quite remarkable outcome given that economic framework, but it is gradually becoming clear that, as far as the Huddersfield property market is concerned, people’s time in lockdown has been spent reflecting on what they really wanted from their home and has meant that the normal rules of the game simply do not apply…. for now.

 

As Brighouse First-time Buyers are Being Locked Out of the Brighouse Property Market – Rents Have Risen by 3.5%

With the banks reducing the number of low deposit mortgages (i.e. deposit of 10% and below) since Covid-19 hit in the spring, this has meant that the number of Brighouse first-time buyers has been decreasing quickly, meaning many of those would-be Brighouse buyers wanting to make the first step on the Brighouse property ladder will stay in the Brighouse rental sector.

 

This has caused demand to grow amongst Brighouse renters for larger homes to ride out Covid, as they hunker down for the long haul to wait for normality to return to the property market. This has caused

 

Brighouse rents to rise from £500 to the current £517 per month over the last 12 months, an increase of 3.5%.

 

Interestingly, the opposite is happening in Central London, where the rents tenants are having to pay have dropped by 3.8% in the last 12 months, as demand has dropped like a stone. It appears Central London tenants are looking to move out to the suburbs, in search of bigger homes, gardens and green open spaces. For example, the average rent for a 1-bed apartment in St. John’s Wood currently stands at a very reasonable £1,817 per month whilst a 2-bed apartment in Kensington and Chelsea is currently at an average bargain rent of £3,715 per month (yes, they might be low compared to last year, yet for us in Brighouse, that still seems like a lot of money!). Also, there has been further downward pressure on Central London rents, as many Airbnb landlords have dumped their short-term holiday let properties onto the long-term rental market as the tourism in the capital has dwindled because of the pandemic.

 

This has been the sharpest drop in Central London rents since the summer of 2009, when the property market was still stumbling from the Credit Crunch.

 

This means there is a reverse of the trend of the 2010’s (2010 to 2018 to be exact), when initially the London property market was shooting up whilst the rest of the country was in the doldrums. Then, when the rest of the UK did start to rise slowly in 2013, London kicked on even further like a rocket … yet now it appears the opposite is happening.

 

Getting back to Brighouse, according to the Land Registry property values currently stand 2.2% higher than a year ago; this is split down as follows:

 

·         Detached Brighouse homes 2.8% higher

·         Semi-detached Brighouse homes 3.4% higher

·         Townhouse/terraced Brighouse homes 2.1% higher

·         Brighouse apartments/flats 1.8% lower

Yet, do remember, these figures do NOT take into account the prices paid by desperate Brighouse buyers this summer, often paying top dollar to secure the property. This will only filter through in the figures released in the spring.

 

So, why are the banks curtailing the number of low deposit mortgages, meaning that first-time buyers must find a much larger down payment before they are able to buy their first Brighouse property?

 

The reason is the banks are fearful of a house price crash in 2021 (although if you recall I wrote about that a few weeks ago and the reasons why that is less likely to happen). They too are afraid of the frothy nature of the property market since the end of the first lockdown in late spring. The bank is lending its own money to buyers and no mortgage lender wants to be holding an enormous amount of these types of high percentage mortgages if house prices fall in 2021, because the bank would be saddled with negative equity and repossession on their hands (and we all know what that did to the housing market in the late 1980’s and early 1990’s as repossessions rocketed).

 

This can quite clearly be seen in the pricing and availability of low deposit mortgages. As the Bank of England has reduced its base rate to 0.1%, in the last 12 months 10% deposit mortgages rates have actually increased from 2% to 2.8%. Also, when lenders have been offering 10% mortgages throughout the summer, borrowers have had only a 24-hour window to commit before the lender withdraws the mortgage product from the market because of over subscription. As with all economics, if demand is greater than supply, the price goes up. That extra 0.8% doesn’t sound a lot until you realise a first-time buyer would have to pay an additional £167 per month in interest payments on a 10% deposit mortgage, assuming they borrowed £250,000.

 

However, it’s not all doom and gloom for first-time buyers as there are embryonic signs that the 10% deposit mortgage market could gradually be returning to normal, as I have recently heard some lenders taking up to a week for their 10% deposit mortgage offers to run out. Fingers crossed!

 

So, what does all this mean for Brighouse landlords? Those Brighouse landlords with properties with gardens and larger rooms will be seeing increased demand. The ability to have pets in the rental property is also an advantage, and depending on the property, can add a decent premium to the rent that can be charged.

 

One final thought though for all homebuyers in Brighouse, be aware it’s going to be very challenging to get your house purchase through in time to meet the 31^st March 2021 stamp duty holiday cut off if you are starting the process in November. Make sure your lender and solicitor have the capacity to meet that deadline and when you are asked for information, you drop everything to provide it. The odd days’ delay here and there will mean the difference between you getting the keys for your new Brighouse home before the end of March 2021 and saving thousands of pounds in Stamp Duty Tax … or feeling a fool from the 1^st April 2021 and having to pay the tax!

Each Huddersfield landlord could be hit by a £24,094 bill ...and the 5 ways on how all Huddersfield landlords can escape the worst of the coronavirus downturn on their Huddersfield rental property.

With the second lockdown starting on the 5^th November 2020, does this mean Huddersfield landlords can wave goodbye to their Huddersfield buy-to-let investment and see it go up in smoke on the bonfire of buy-to-let dreams, like a Guy Fawkes puppet?

 

With many Huddersfield tenants at risk of losing their jobs after the furlough scheme ends next March and as the reverberations of the coronavirus recession hit this winter, what does this all mean for Huddersfield landlords and what can they do to mitigate the risks?

 

Since the spring, most Huddersfield tenants and buy-to-let landlords have been protected from the coronavirus crisis thanks to the banks with their mortgage payment holidays and job support schemes.

 

Before the second lockdown was announced on the 31^st October, it was expected, that as the furlough and mortgage payment holidays were due to finish on Halloween, there would be some serious fallout from those schemes finishing. One silver lining from the lockdown (if you can call it that) is that mortgage payment holidays and furlough have been extended, yet does all that just kick the can down the road?

 

The question is, what can Huddersfield landlords do to mitigate the financial risk on their Huddersfield buy-to-let investment?

 

1.      Help Your Huddersfield Tenants Get the Financial Support They Are Entitled To 

Billions of pounds are being spent by the Government to help those people whose income has been hit by coronavirus. The better Huddersfield letting agents and self-managing landlords are supporting, guiding and helping those Huddersfield tenants in financial difficulty to gain a better understanding of the Universal Credit (UC) processes, systems and payment levels, to enable their tenants to pay the rent and ultimately indirectly, help their Huddersfield landlord. Also, if you are a Huddersfield tenant, and that support isn’t given when you ask, don’t forget Kirklees Council do hold special cash reserves for discretionary housing payments, which can be utilised to close the gap in rent between what UC pays and your current rental commitments. Also, the Government’s Money Advice Service and Citizens Advice are a good online resource for you to find out what you are entitled to.

 

2.      Adopting, Adapting & Improving Your Huddersfield Buy-to-Let Property

Demand for gardens or office space means Huddersfield landlords will need to think outside the box. Those Huddersfield homes with tenants sharing (e.g. HMO’s and shared houses) might need to price their pre-coronavirus 4 bed sharing house to say maybe a 3 bed sharing house plus a work/office room and, if you haven’t already, installing a top of the range, fast and dependable internet connection could be the thing that swings it. Outdoor space and gardens are really high on Huddersfield housebound tenant’s wish lists, in fact I have come across some Huddersfield tenants demanding that new rental properties have a landscaped garden or those that bought a dog or cat for company during the first lockdown, are looking for their Huddersfield landlords to relax their ‘no pets policy’.

 

3.      Hold On to Your Good Huddersfield Tenants

Those Huddersfield buy-to-let landlords with decent tenants, who find themselves in financial dire straits should consider attempting to keep them, even if their own monetary circumstances mean they have to decrease their rent somewhat over the short term. Now of course, I would expect tenants need to prove their circumstances, yet if their plight was real, surely it would be a wise choice to reduce the rent by perhaps £50 a month and support your tenants? You know they are taking great care of your Huddersfield rental property and rather than risk the issue of advertising your empty buy-to-let property  – particularly when there is no assurance you will achieve your existing rent and ultimately risk drawn-out void periods with no rent coming in at all. What I would suggest therefore,  in such circumstances, is that you create a new Assured Shorthold Tenancy agreement with a longer term with your existing tenant at a lower rent – a temporary measure but with peace of mind for both parties which can then be reviewed once that tenancy is up for renewal.

 

4.      Carry out Firmer Checks on Your Prospective Huddersfield Tenants 

Many private Huddersfield landlords and a few slipshod Huddersfield letting agents tenant checks are somewhat lacking in their depth. Trust me, there is tenant referencing … and then there is ‘proper’ forensic tenant referencing. As certain parts of the British economy have been hit harder than others, Huddersfield landlords must consider when choosing their new tenants, the type of work they do or who their employer may be, to enable them to decide on their future capacity to meet their rental commitments.

 

5.      Rent Guarantee Insurance for Your Huddersfield Rental 

There are still insurance companies offering landlord rent guarantee insurance if your tenants become unable to pay the rent. Many insurance firms removed these insurance products in the first lockdown, yet some have returned to the insurance market although insurance premiums have gone up in price. Remember to check the small print of the insurance, although you will get a lower insurance premium if you can show stringent tenant referencing (as per the previous point). 

 

The Nuclear Option - Eviction

 

Huddersfield landlords need to be conscious that, should their tenancy run into trouble, the Government have changed the rules when it comes to eviction during the coronavirus pandemic. Going into the first lockdown, there was already a backlog in the courts and now, just before going into the second lockdown, bailiffs have been instructed not to enter rental properties in high risk Tier-2 and Tier-3 Covid-19 areas.

 

Eviction really does have to be the very last option. Negotiation or arbitration will nearly always deliver quicker and improved outcomes for both parties. Huddersfield landlords who do come to mutually agreeable arrangements with their tenants by briefly reducing the rent, or allowing payment holidays with legally enforceable pay back schedules should ensure they get the agreed terms in writing and run by a solicitor or their agent (feel free to drop me a note if you need advice).

 

However, if eviction is required, it doesn’t mean the tenant gets off ‘scot free’. Evicted tenants, depending on their circumstances, will either be placed temporarily into an inexpensive B&B, asked to move in with family or given one of the local authorities temporary accommodation properties, with the goal to then move them into long term council accommodation (as the chances of obtaining private rented accommodation would be slim with agent’s heightened reference checks – more of that at the end).

 

The Potential Cost of Evicting a Problem Huddersfield Tenant

 

The average rent for a Huddersfield property currently stands at £721 per calendar month.

 

Thankfully, evictions are very rare. Last year before lockdown, tenants from 201.4 rental properties were evicted each working day in the UK ... but if yours was one of those, that is still a potentially large cost.

 

Working on the basis that most evictions from the first rent not being paid, through to eviction, refurbishment of the kitchen, bathroom, carpets and décor (because often these do need sorting/replacing) were taking on average between eight to nine months before coronavirus hit, (plus the mortgage payments), this means a Huddersfield landlord could be hit by a £24,094 bill, broken down as follows:

 

Missing rent (8½ months)	£6,129
New kitchen	£3,535
Bathroom	£2,031
Carpets	£2,213
Redecorate	£1,937
Agents fees	£643
Legal fees & court fees	£3,500
Mortgage payments	£4,106
Total	£24,094

 

What that would be now is anyone’s guess – yet it could be a lot more.

 

This is why it is so important to get the best tenant from day one. Many Huddersfield tenants, who know they wouldn’t pass the references of letting agents, are attracted to those private landlords who don’t use a letting agency, as they know their referencing checks are not as strict and may be a softer touch. That’s not to say going with a letting agent is a guarantee you won’t need to evict; it just means the chances are much, much smaller. Like anything in life - it’s a choice.

 

Whether you are a Huddersfield landlord who uses a letting agent or not and feels their reference checks are not to the standard or level you might hope or if you want a chat about the best rental guarantee insurance, then give me a call ... what have you got to lose?