Embarking on the Landlord Journey: Insights for Aspiring and Seasoned Landlords in Huddersfield

Property investment has long been a staple in British retirement planning.

 

The introduction of the buy-to-let mortgage over a quarter-century ago marked a significant turn, presenting opportunities for dual returns: rental income in the short-term and capital growth in the long-term. You can see why there are a substantial number of Huddersfield landlords who view property investment as a cornerstone of their retirement strategy.

 

However, this path is full of challenges. Recent shifts in tax and regulatory landscapes, coupled with escalating interest rates, have imposed pressures on profitability, compelling some landlords to reconsider their positions. Thus, becoming a landlord in Huddersfield necessitates meticulous research and a strategic approach.

 

The Foundations of Buy-to-Let Mortgages in Huddersfield

A critical step in this venture is securing a buy-to-let mortgage, a process distinct from obtaining a homeowner loan. Lenders assess buy-to-let applicants based on an interest-coverage ratio (ICR), which demands that rental income meets or exceeds a certain percentage of the monthly mortgage interest (a minimum of 125% for standard taxpayers and 145% for higher-rate taxpayers). Additionally, many lenders require that buy-to-let borrowers have a minimum annual income outside of rental earnings to mitigate dependence on rental income.

 

Regarding the initial investment, a typical deposit hovers around 25% of the property's value. The borrowing landscape has experienced upheavals with the Bank of England's recent base rate increases. However, the average rate for a five-year fixed buy-to-let mortgage has witnessed a reduction in rates recently. For example, at the time of writing, HSBC has a 5-year BTL mortgage at 4.84% with a 75% Loan to Value (i.e. you put down a 25% deposit) with an arrangement fee of £1,999. Prospective Huddersfield landlords must judiciously consider these factors, evaluating the sustainability of their investment against potential interest rate hikes.

 

Understanding Costs and Preparations

The financial commitment extends beyond the deposit. Prospective landlords in Huddersfield should account for additional expenses like stamp duty, which includes a 3% surcharge for second homes. Furthermore, maintaining a contingency fund for maintenance and unforeseen rental voids is prudent. It's advisable to earmark approximately 1% of the property’s value annually for repairs and upkeep.

 

Navigating the Buy-to-Let Landscape

Investment in Huddersfield buy-to-let properties is not merely a financial decision but also an emotional one. Landlords must be prepared for the demands of property management, ranging from addressing maintenance issues to dealing with tenant-related challenges. The complexity of landlord responsibilities is underscored by over 150 pieces of legislation governing the sector, a figure poised to rise with impending regulations.

 

Demand & Supply of Huddersfield Rental Properties

The Huddersfield rental market has experienced a sustained period of significant rental inflation over the past few years. Despite that, Zoopla recently stated that demand for rental properties on its portal was 51% higher in Q3 2023 than the five-year average.

 

However, even though demand is higher, the long-term supply of rental properties coming onto the market in the Huddersfield area has dropped.

 

In the Huddersfield area (HD1-HD5, HD7/8), the numbers of properties being let over the last six years are as follows.

 

In 2018, an average of 238 properties were let per month in the Huddersfield area.

In 2019, an average of 234 properties were let per month in the Huddersfield area.

In 2020, an average of 197 properties were let per month in the Huddersfield area.

In 2021, an average of 171 properties were let per month in the Huddersfield area.

In 2022, an average of 191 properties were let per month in the Huddersfield area.

In 2023, an average of 206 properties were let per month in the Huddersfield area.

 

 

 

So, we have increased demand and reduced supply, which can only mean rents will continue to grow as they have for the last couple of years.

 

This ongoing imbalance between supply and demand is a consistent characteristic of the rental market throughout all regions and countries in the UK. Currently, the annual rent growth rate in the UK stands at just over 10%. It's not good news for tenants, yet it still makes buy-to-let financially viable for most Huddersfield landlords, especially as interest rates have risen significantly in the last few years.

 

Rent Adjustments and Tenant Relations in Huddersfield

For landlords, understanding the regulations surrounding rent increases is crucial. These rules vary depending on the tenancy type, with periodic tenancies allowing for annual rent reviews. Ensuring transparent communication and fair practices in rent adjustments can foster harmonious landlord-tenant relationships.

 

The Eviction Process: A Delicate Matter

Eviction is a process governed by strict legal parameters. The anticipated changes in the Renters’ Reform Bill, particularly concerning Section 21 evictions, are set to alter the landscape, emphasizing tenant protection. Landlords must be well-versed in these regulations to navigate tenant eviction legally and ethically.

 

Conclusion: The Role of Expertise in Property Investment

Having a knowledgeable and experienced guide is invaluable in the intricate world of property letting. As a seasoned agent in Huddersfield, I offer a wealth of expertise and insight, making me and my team an ideal partner for both novice and experienced landlords.

 

Whether navigating the complexities of buy-to-let mortgages, understanding the nuances of property investment in Huddersfield, or managing tenant relationships, our proficiency is a vital resource for anyone looking to explore or deepen their involvement in the property market.

 

In conclusion, the journey to becoming a landlord, especially in a market like Huddersfield, rewards careful planning, informed decision-making, and strategic foresight. With the guidance of seasoned professionals like us, Huddersfield landlords can navigate the challenges and complexities of the property market, ensuring their investment not only endures but thrives.

 

Rental Market Dynamics: A National & Regional Overview with a Focus on Huddersfield

The UK rental market has once again demonstrated its resilience and dynamic nature.

 

Recent figures state that the average advertised rent for newly listed properties in the UK last month was £1,787 per calendar month (pcm).

 

The average for the UK excluding Greater London is £1,211 pcm (and Greater London on its own is £2,989 pcm).

 

In our region of Yorkshire and Humber, the average rent currently stands at £912 pcm.

 

Rents in Yorkshire and Humber have grown tremendously.

 

·         Rents in Yorkshire and Humber one year ago (Oct 22) were £830 pcm, a growth of 9.82%

·         Rents in Yorkshire and Humber three years ago (Oct 20) were £688 pcm, a growth of 32.48%

·         Rents in Yorkshire and Humber five years ago (Oct 18) were £645 pcm, a growth of 41.32%

·         Rents in Yorkshire and Humber seven years ago were (Oct 16) £671 pcm, a growth of 35.88%

 

Looking specifically at Huddersfield (HD1-5, HD7-8), the average rent in Q3 2021 was £634 pcm, for Q3 2022, it was £716 pcm and for Q3 2023, it has been £785 pcm.

 

(Quarter 3 for Huddersfield was used to calculate the average as the sample size is much smaller than regional or national stats).

 

A persistent disparity between supply and demand strongly influences this rise in rents.

 

Demand from prospective tenants is intensifying, but there aren't enough UK rental properties to accommodate them. That is also true for Huddersfield tenants.

 

As a snapshot, one of the major property portals stated the average rental property in the country now receives approximately 25 enquiries from potential tenants. This is a striking contrast from the average of eight enquiries recorded in the pre-pandemic era.

 

Furthermore, the number of tenants looking to move within Britain has surged by just over 40% since 2019. On the other side of the coin …

 

The average number of UK rental properties coming on the market in the five years before the pandemic was 117,510 per month. In the last two years, it has been 99,747 properties per month, a drop of 15%.

 

Talking to agents in Huddersfield, they are witnessing large numbers of eager tenants attending viewings as soon as a property is listed. Such data is echoed by estate and letting agents I know nationwide, many of whom highlight the wide gap between soaring demand and the limited supply of rental stock.

 

Encouragingly, even though the overall average of properties coming onto the market for rent for the last two years is 15% down (as mentioned above), that statistic does mask the fact that 2023 is very different to 2022’s available rental properties. The number of new properties being introduced to the rental market in the last ten months (Jan to mid-Oct 2023) is 6.9% higher year-on-year than the same time from the year before (i.e., Jan to mid-Oct 2022).

 

While the continual surge in rental prices and the mismatch between available properties and tenants may make the market challenging for many to navigate, signals suggest an easing of this pressure.

 

With new rental listings at higher levels, a sustained balance between supply and demand may decelerate the annual growth of Huddersfield rental prices.

 

For Huddersfield tenants in this tight market, being proactive is crucial. Speed is of the essence when arranging viewings, especially amidst other commitments. Immediate property alerts on the portals and also cultivating strong face-to-face relationships with local letting agents can offer a competitive edge. Tenants must be clear about their property requirements; from budget constraints and intended stay duration. Flexibility, especially concerning the move-in date, can make an application stand out. Finally, having one’s finances and documentation ready can expedite the tenancy application process.

 

The evolving rental landscape is also prompting many to reconsider traditional preferences. Expanding search horizons beyond typical hotspots in Huddersfield might increase the probability of securing a property and introduce tenants to more cost-effective options.

 

For Huddersfield landlords, these national figures and regional and town-specific statistics provide a comprehensive overview. The underlying message is clear: despite the increase in rental properties, the rents continue to rise, painting a promising picture for landlords who continue to provide much needed homes for Huddersfield tenants.

 

As Huddersfield's trusted property consultant, we remain committed to keeping you informed and guiding you through these dynamic market shifts.

The Renters’ Reform Bill

Contrary to what some may say the Renters’ Reform Bill may well be a positive for landlords.  Long awaited since its initial promise in 2019, MP’s will have the opportunity to consider and debate the bill, no doubt as always there will be some deviation from what has been stated.

Some highlights of the bill below :-

 

• There will be a single Private Renters' Ombudsman

 

• There will be a new property portal which will provide greater clarity regarding compliance.

 

• There will be additional protection under Section 8 with the introduction of mandatory eviction, this occurs where a tenant has been in at least two months’ rent arrears three times within the previous three years, regardless of the arrears balance.

 

• Section 8 provides a new ground for possession after a minimum period of six months - you can apply section 8 to a tenancy if you then wish to sell a property, or even where you wish to allow family members to move into a rental property.

 

• Tenants would need to provide two months’ notice when leaving a tenancy, to ensure you can recoup the costs of finding a tenant and avoid lengthy void periods.

 

• Stronger grounds to evict based anti-social behaviour

 

The bill in my view does not deserve the label of a landlord bashing license that some of the press have given it.

As the leading agent in the area with over 1,200 managed properties we are more than equipped to guide you through the process and as always I will keep my clients informed as changes emerge and when the new rules will come into play.

Huddersfield Property Market Holding Up Despite Doom and Gloom in the Newspapers

The Huddersfield housing market over the last three months is now becoming more ‘normal’ after the last couple of years of insane demand when the lockdowns started a race for space!

Even with the blackening economic doom-mongers forecasting a harsh slowdown in the British property market, the number of people buying and selling their homes is still very good for the time of year.

 

Whilst many homeowners are reducing their asking prices, it is not the 20% (some even said 30%) drop some property commentators and newspaper journalists had predicted.

 

Looking at the stats for Huddersfield for the last three months since the disastrous Truss mini budget – they make good reading.

 

Of the 250 Huddersfield properties that have sold (stc) since late September, the average length of time it took to achieve a sale was 44 days.

 

Interesting when you split it down by price, in Huddersfield:

 

·         Under £100k – 59 days

·         £100k to £200k – 27 days

·         £200k to £300k – 81 days

·         £300k to £400k – 34 days

·         £400k to £500k – 91 days

·         £500k to £1m – 103 days

·         £1m and above – 73 days

 

And by type:

 

·         Huddersfield Apartment/Flat – 62 days

·         Huddersfield Terraced/Townhouse – 44 days

·         Huddersfield Semi-Detached – 29 days

·         Huddersfield Detached – 70 days

 

The latest sold price data from the Land Registry shows that Huddersfield house prices currently remain 12.1% higher than they were 12 months ago; the rate of growth has dropped significantly.

 

Last month, Huddersfield house prices rose by 1.3%; thus, we are seeing the first sign that the property market is starting to cool.

 

With interest rates at 3.5% and further increases likely in 2023, that will undoubtedly spur ongoing cooling in Huddersfield property values yet it’s doubtful we will see the Huddersfield property market go into the deep freeze that many doom-mongers were predicting.

 

As I said in recent articles on the Huddersfield property market, we will see a 5% to 10% reduction in Huddersfield house prices over the next 12 to 18 months.

 

That will only take us back to the prices achieved in mid/late 2021 or early 2022 (depending on the property type).

 

Landlords have experienced double-digit rent growth in the last 12/18 months with a shortage of rental properties coming onto the market. I cannot see this changing in the short term, so I expect rents to be a further 10% higher by Christmas 2023.

 

Last week I stated it is not always wise to only focus on house prices but also take reference from the number of property transactions completed that feed the fire of the British property market.

 

For example, in March 2021, 135,670 properties sold, yet a month later, it dropped to 87,600. A couple of months later, it rose again in June 2021 to 165,290 homes sold (for it to drop to 64,000 in July).

 

Whilst this is good news for estate agents and removals companies, it can skew the property market and put undue pressure on the property market (pressure which could cause a housing crash if not put under check).

 

Like most things - slow, steady and consistent is the preferred option for the property market.    Throughout 2022, the number of properties selling in the UK has been a steady average of 68,832 per month, ranging from a low of 61,800 in January 2022 to 72,200 in July 2022.

 

This consistency will continue into 2023 and a return to a more 'normal' housing market.

 

One final thing I have noticed about the Huddersfield property market in the last six months is the number of larger properties coming onto the market that last sold over 25 years ago.

 

Homeowners in their 20s, 30s and early 40s tend to move every five or six years, yet when they reach their late 40s and 50s, they tend to stay put for longer. These properties only tend to come on the market when people pass away or must be sold for nursing home fees.

 

These mature homeowners are downsizing for several reasons. Their children have flown the nest and they’re rattling around in homes with accommodation they don’t need. Many are being driven to sell their large homes in light of mounting energy bills, high inflation and never-ending maintenance costs that larger properties demand.

 

The second reason is that the recent rises in Huddersfield house prices has meant the money released to downsize has grown, meaning if these mature homeowners sell up and cash in to more manageable properties, the amount of money released is quite impressive.

 

In conclusion, 2023 is going to be a more 'normal' year, akin to the 2016 to 2019 years. Huddersfield homeowners need to be realistic with their pricing, yet as over eight out of ten sellers buy another home, the one you buy will be lower.

 

If you are considering selling your Huddersfield home in 2023 and would like a chat about your options, feel free to drop me a line or call the office.

 

Yours Sincerely

 

Chan Khangura BA (Hons) DipRLM MARLA MNAEA

Proprietor & Managing Director Whitegates Estate Agents Huddersfield & Brighouse

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