·
The number of properties available
to rent in Huddersfield has dropped from 1,183 to 412 since February 2020.
·
The average rent a tenant has had
to pay in Huddersfield has risen from £681 to £715 since February 2020.
·
Many
Huddersfield landlords have cashed in on the post-lockdown property boom of the
last two years and sold their properties to owner-occupiers - not fellow
landlords.
·
The supply of Huddersfield rental
property isn't near what is needed, which is of benefit to Huddersfield
landlords rather than Huddersfield renters.
The Huddersfield
rental property shortage is currently very evident. In this article, I
will investigate why there is such a significant lack of homes available for
rent across Huddersfield and what it means for buy-to-let investors.
Anybody
who enjoys surfing the property portals (Rightmove, Zoopla and On the Market)
will have observed an emerging trend that the number of properties available to
rent in Huddersfield has dropped considerably in the last couple of years.
This
reduction has been seen all around the UK as well. For example, on 1st
November 2020, there were 372,931 properties to rent on portals. By the 1st
November 2021, that had dropped to 275,650; by the 1st November
2022, that had fallen to 171,224.
That
doesn't mean the number of privately rented homes in the country has dropped by
over half. Fewer properties are coming onto the market to rent. I will explain
why in this article.
For
tenants, especially over the last 12 months, it has become progressively more
challenging to find a Huddersfield rental home, thus making the rent they must
pay go up. This state of affairs in the property market isn’t showing an indication
of getting any easier either, making for a hard time for Huddersfield renters.
So,
what is the reason behind the Huddersfield rental property shortage, and what
does this mean for existing Huddersfield landlords or those potential investors
considering buying a Huddersfield buy-to-let property soon?
Several
different components are making the perfect storm in the UK property market.
Firstly, the number of households in the UK.
The
UK has not been building enough homes for the last 20 years. I appreciate that
parts of Huddersfield seem like one huge building site, yet as a country, we are
woefully undersupplied with property to live in. This has meant house prices
continue to rise due to demand.
The
government have known about this issue for decades. The Barker Review of
Housing Supply published in 2004 stated that the UK had experienced a long-term
upward trend of 2.4% in real house prices since the mid-1970s because
of a lack of house building. The report stated that 240,000 houses needed to be
built each year to keep up with demand.
The
average number of houses built since the mid-1970s has been around
165,000
per year, meaning the UK is short of 3,375,000 houses
(i.e. 45
years multiplied by 75,000 missing homes per year).
Several
years ago, the government set a target to build 300,000 new homes each year to
address this issue.
However,
in 2019/20, the actual number of homes delivered stood at just 243,770. In
2020/21, the number of properties built dropped to only 216,000 new homes. In a
nutshell, there are fewer available homes to buy, meaning fewer available homes
to rent.
Secondly, Huddersfield tenants are staying in their rental homes longer.
A
Huddersfield first-time buyer's average house deposit is £31,212
(the
UK average deposit is £53,935).
The
average rent of a Huddersfield property in November 2022 is £715 per calendar month
(up from £681 per calendar month in February 2020).
These
numbers translate into Huddersfield renters not being able to pay the rent and be
able to save for a deposit, or if they are saving, it is taking a lot longer to
save for a deposit due to the cost-of-living crisis and higher rent costs.
Also,
many Huddersfield tenants have decided to stay in their existing rental homes
because of the rent rises. Many landlords are less inclined to raise the rent
on an existing property when they have a decent tenant who keeps the property
in good condition and pays rent on time. Anecdotal evidence also suggests that
rent arrears in those properties are dropping as tenants know if they don’t pay
the rent, the chances are they will have trouble finding another property, and
if they do, they will have to pay a lot for their next rental home.
For
Huddersfield landlords, this is all positive news - tenants are staying for
longer in their Huddersfield rental properties, arrears are lower, and void
periods are less likely. When it comes to the market there is less competition (because
of the decrease in the availability of Huddersfield rental properties) so this makes
the investment an even better bet.
Thirdly, landlords are selling up on the back of recently increased house
prices.
It
would be difficult for Huddersfield buy-to-let landlords to ignore the rising
property prices in recent years.
The
average property value in Huddersfield in the summer of 2022
was
13.7% higher than in the summer of 2021.
For
some Huddersfield buy-to-let landlords, especially those who were classified as
‘accidental landlords’ (an accidental landlord is a landlord who never chose to become
a landlord, it was just after the Credit Crunch of 2008/9, they found
themselves unable to sell their property, so they temporarily let their own property
out), they chose to ‘cash in’ on the higher house prices. This would
have also contributed to the lack of available Huddersfield homes for rent.
Yet
everything isn’t all sweetness and light for Huddersfield landlords.
Landlords
have a few costs to consider before investing in buy-to-let, including
everything from regular refurbishment costs, buildings insurance, letting
agents’ fees, income tax, and, not forgetting, stamp duty.
Talking
of costs, one issue some Huddersfield landlords are facing is their failure to
plan financially for the recent mortgage interest rate rises. Some Huddersfield
landlords may have become complacent to the ultra-low Bank of England base
rates we have had since 2008 and, therefore, may need to sell their rental
property, which, if bought by a first-time buyer, will remove another property
from the Private Rented Sector.
Another
hurdle to jump is the proposed new regulations requiring better energy
efficiency for rental properties. It is proposed all new tenancies must have at
least a minimum of a 'C’ rating for their EPC (Energy Performance Certificate)
from 2025 (and 2028 for all existing tenancies).
Therefore,
as a buy-to-let Huddersfield landlord, it is wise to do your research to make
sure the buy-to-let opportunity is correct for your rental portfolio,
particularly when it comes to weathering any impending financial storms.
Landlords
need to consider the returns from their
Huddersfield
buy-to-let investments.
Landlords
can earn money from their buy-to-let investments in two ways. One is the
property's capital growth, and the other is the rental return (often expressed
as a yield). In 96% of buy-to-let investments, there is an inverse relationship
between capital growth and yield (i.e. properties that tend to go up in value quicker
will have lower yields 96% of the time – and vice versa).
Getting
the best balance of yield and capital growth depends on your current and future
needs from your Huddersfield buy-to-let investment.
If
you would like me to review your portfolio and ascertain if your existing
portfolio will match your current and future needs for the investment - whether
you are a client or not, feel free to drop me a line, and we can have a
no-obligation chat and possibly organise a review.
What
does all this mean for the Huddersfield rental market?
The
continued shortage of Huddersfield rental properties means it will be more
difficult than ever to find a Huddersfield property to rent, and so rents will
continue to grow.
Unlike
in Scotland, England and Wales do not have rent controls, with Westminster
ruling out the possibility of introducing rent control here to deal with the
cost-of-living crisis.
You
would think rent controls would be a no-brainer, yet economists from around the
world have proved for the last 75 years that rent controls might help tenants
in the short term, yet ultimately it drives landlords to sell their investments
in the long term, thus reducing the stock of available properties to rent out
(not great for future tenants).
Therefore,
it is highly likely that Huddersfield rents
will
continue to rise for tenants.
Landlords
who persevere with their Huddersfield buy-to-let properties or become a Huddersfield
buy-to-let landlord are set to benefit because they have an asset in very high
demand.
The
housing shortage, not to mention the other issues discussed above that are
affecting the supply of rental properties, is unlikely to be fixed anytime soon!
In
conclusion, the Huddersfield rental market is a constantly changing picture.
What is known is that the supply of rental properties is far from what is
needed, which can only be to the benefit of buy-to-let investors rather than of
tenants renting.
I
see buy-to-let as a long-term investment. Everyone reading this knows that the
real value in your buy-to-let investment is playing the long game, allowing
your Huddersfield buy-to-let investment to grow over time. Like the crypto or
stock market, getting sucked in by get-rich-quick schemes that are selling
'apparent quick wins' in property investment is very easy.
I
regularly highlight the best buy-to-let deals for Huddersfield landlords with
all the estate agents (not just my own). You don't need to be a client of mine
either to receive that information. Drop me a line or call (without any cost or
obligation) if you are interested in making your first Huddersfield buy-to-let
investment or considering adding to your existing Huddersfield portfolio.
