Private Renting set to grow by 5,500 Huddersfield households by 2025

I was having a most interesting chat the other day with a Huddersfield landlord when we were looking at a property. As I am sure you are aware, I am always happy to cast my eye over any potential buy to let purchase in Huddersfield, be that you emailing me a Rightmove link, a brochure in the post or even treading the carpet and seeing it together. I don't charge for that, and you don't even need to be a client of mine. We got talking about the Huddersfield Property Market and this landlord brought up the subject of a report he had read from the Royal Institution of Chartered Surveyors (RICS) and PricewaterhouseCoopers (PwC) that stated almost 1.8m new rental homes are needed by 2025 to keep up with current demand from tenants. He wanted to know what this meant for Huddersfield.

Well my blog reading friends, some commentators said last Winter that buy to let was about to die, what with the new stamp duty changes and how mortgage tax relief will be calculated. Others even said 500,000 rental properties would flood the market nationally in the 12 months after the new Stamp Duty rules came into force on the 1st April 2016 as landlords left the rental market. Well, all I can say is, I wish all the landlords of those half a million properties would hurry up and put them on the market – because I have plenty of other potential landlords wanting to buy them!

Back to the matter in hand.. if the RICS and PwC are indeed correct, what does this mean for Huddersfield? The fact is, as a country, we are facing a precarious rental shortage and need to get Huddersfield building in a way that benefits a cross-section of Huddersfield society, not just the fortunate few. I call on the Prime Minister to drop the higher stamp duty tax on buy to let purchases to ease the pressure on the rental market.

Of the 69,100 households in Huddersfield, currently 28,400 tenants live in 13,000 private rented properties. If we apportion those 1.8m households equally around the Country, that means in nine years’ time, the number of rental properties in Huddersfield needs to rise by 5,500 (i.e. 42.8%) .. taking the total number of rented properties in the city to 18,500.

That means Huddersfield landlords need to buy around 600 properties a year between now and 2025 to meet that demand – because according to my calculations, an additional 12,200 people will want to live in all those 'additional' Huddersfield rental properties – so why is the government penalising landlords?

Thankfully the new housing minister Gavin Barwell detached Teresa May's new administration from the Cameron/Osborne laser-like focus of just home ownership to solve our housing issues, saying "we need to build more homes for every single type of person needing a home and not focus on one single tenure". The private rented sector became a stooge under David Cameron's watch and still, with increasingly unaffordable Huddersfield house prices, the majority of new Huddersfield households will be relying on the rental sector in the future to house them. I can only say Westminster must put in place the measures that will allow the rental sector to flourish. Any restrictions on the supply of rental property will push up rents (bad news for tenants), thus side-lining those members of Huddersfield society who are already struggling. Let's hope this new Government continues to see the contribution landlords give to the country as a whole.

7.6% of Huddersfield People live in Shared Households

I had an interesting chat the other day with a Huddersfield landlord. He said he had been chatting with an architect friend of his who said back in the mid 2000’s, the developments he was asked to draw were a balance of one and two bed properties, compared to today where the majority of the buildings he is designing are more towards two and sometimes three bedrooms. Now of course, this was all anecdotal but it made me think if similar things were happening in the Huddersfield property market?

This is a really important point as I explained to this landlord, as knowing when and where the demand of tenants is going to come from in the coming decade is just as important as knowing the supply side of the buy to let equation, in relation to the number of properties built in Huddersfield, Huddersfield property prices, Huddersfield yields and Huddersfield rents.

In 2001, there were 159,000 households with a population of 388,600 in the Kirklees Council area. By 2011, that had grown to 173,500 households and a population of 422,400.

.. meaning, between 2001 and 2011, whilst the number of households in the Kirklees Council area grew by 9.11%, the population grew by 8.72%

Nothing surprising there then. But, as my readers will know, there is always a but! My analysis of the 2011 Census results, using the most recent in-depth data on household formation (eg ‘one person households’, ‘couples/ family households’ or ‘couple + other adults households and multi -adult households’), has displayed a sudden and unexpected break with the trends of the whole of the 20^th Century. There has been a seismic change in household formation in Huddersfield between 2001 and 2011.

Between 2001 and 2011, the population of Huddersfield grew, as did the number of Huddersfield properties (because of new home building). However, the growth rate of new properties built in Huddersfield was much lower than expected though, but still the population has grown by what was expected, meaning the average household size was larger than anticipated in Huddersfield. In fact, average household size (ie the number of people in each property) in 2011 was almost exactly the same as in 2001, the first time for at least 100 years it had not fallen between censuses. (Since 1911, household size has decreased by around 20% every decade).
Looking at figures specifically for Huddersfield itself,

·         One person households – 33.2%               

·         Couples/family households – 59.2%

·         Couple + other adults/multi-adult households – 7.6%

This decline was reflected in large scale shifts in the mix of household types. In particular, there were far more “couple + other adults households and multi -adult households” than expected (7.6% is quite a lot of households). It can be put down to two things; increased international migration and changes to household formation. A particularly important reason for the difference can probably be attributed to the evidence that migrants initially form fewer households (ie two couples share one property) than those who have lived in the UK all their lives. Also, changes to household formation patterns amongst the rest of the population, including adult children living longer with their parents and more young adults living in shared accommodation (Homes of Multiple Occupation).

So, what does all this mean for Huddersfield Homeowners and Landlords? Quite a lot in fact. There has been a subtle shift to slightly larger households in the last decade, meaning smart landlords might be tempted to buy slightly larger properties to rent out – again good news for homeowners who will get top dollar for their home as they sell on. But now with Brexit, household formation might swing the other way in the next decade? Who knows? Watch this space!

House Prices in Huddersfield rise by more than 8% in the last 18 months

Over the last month, the Huddersfield property market has seen some interesting movement in house prices, as property values in the Kirklees Council area rose by 1.5% in the last month, to leave annual price growth at 4.4%. These don’t compare as well to the national figures, where property prices across the UK saw a monthly uplift of 0.42%, leaving the annual property values across the country 8.3% higher. This might be down to the constraining factors of Stamp Duty changes in the spring and more recently our friend Brexit, however, it does mean there might be some bargains out there for landlords and homebuyers alike.

Looking at the figures for the last 18 months makes even more fascinating reading, whereby house prices are 8.2% higher, again thought provoking when compared to the national average figure of 13.6% higher.

However, it gets more remarkable when we look at how the different sectors of the Huddersfield market are performing. Over the last 18 months, in the Kirklees Council area, the best performing type of property was the semi, which outperformed the area average by 0.36% whilst the worst performing type was the apartment, which under-performed the area average by 1.38%.

Now the difference doesn’t sound that much, but remember two things, this is only over eighteen months and the gap of 1.7% (the difference between the semi at +0.36% and apartments at -1.38%) converts into a few thousand pounds disparity, when you consider the average price paid for a semi-detached property in Huddersfield itself over the last 12 months was £153,200 and the average price paid for a Huddersfield apartment was £103,100 over the same time frame.

I know all the Huddersfield landlords and homeowners will want to know how each of the property types have performed, so this is what has happened to property prices over the last 18 months in the area...

·         Overall Average          +8.2%

·         Detached                     +8.6%

·         Semi Detached            +8.6%

·         Terraced                      +8.0%

·         Apartments                 +6.7%

So what does all this mean to Huddersfield homeowners and Huddersfield landlords and what does the future hold? 

When I looked at the month-by-month figures for the area, you can quite clearly see there is a slight tempering of the Huddersfield property market over these last few months. I have mentioned in previous articles that the number of properties on the market in Huddersfield has increased this summer, something that hasn’t happened since 2008. Greater choice for buyers means, using simple supply and demand economics, that top prices won’t be achieved on every Huddersfield property. You see, some of that growth in Huddersfield property values throughout early 2016 may have come about because of a surge in house purchase activity, an indirect result of the increase in stamp duty on second homes from April, thus providing a temporary boost to prices.

However, it may be possible the recent pattern of robust employment growth, growing real earnings and low borrowing costs will tilt the demand/supply seesaw in favour of sellers and exert upward pressure on prices once again in the quarters ahead.

...And Huddersfield property values, assuming that everything goes well with Brexit, I believe in twelve months’ time we should see values in the order of 2% to 3% higher.

Huddersfield Property Market in 2017 and Beyond

As the trees turn from green to hues of red and brown, the Huddersfield property market has a confident feel to it. With the underlying fundamentals of a continued lack of properties being built, a shortage of properties (both in terms of quantity and quality) coming to the market and the continued low mortgage rate environment, buyer enquiries from first time buyers and buy to landlords is strong and motivation is even stronger, given those inexpensive lending rates and general demand caused by under supply.

Now of course, there are a few potential hurdles coming towards us in the coming months that could affect the Huddersfield (and UK) property market. Mrs. May has yet to get her teeth into Brexit negotiations and we don’t know what the US Presidential elections might do to the money markets around the world, meaning that on the run up to Christmas, some savvy buyers may take advantage of the lack of certainty by making cheeky offers, but I don’t believe these will have a huge impact on property values (like the 2008 Credit Crunch).

You see, property ownership, whether it’s for yourself as a homeowner or buy to let landlord, is a long term investment. In fact, focusing on buy to let, a number of landlords who own property in Huddersfield have made contact with me recently asking for my thoughts on the future of the buy to let market in Huddersfield.  Well, as the Politician Edmund Burke said in the 18^th century, "Those who don't know history are destined to repeat it." .. in other words, to see the future you must look into the past.

Since the Millennium, the housing market has had everything thrown at it. The recent Brexit, last year’s General Election, the near melt down of the World Economy with the Credit Crunch, The Dot Com boom and bust, the housing market crisis in 2008, the housing boom of 2001 to 2004 .. the list goes on. In fact here is a graph (courtesy of the Land Registry) of average Property values since the Millennium in the Kirklees Council area.

Even though we had the Dot Com bubble burst in 2000, two years later in January 2002, property values in the Kirklees Council area have risen from £50,300 (in Jan 2000) to £57,100 .. and kept rising to December 2007, when they peaked at £146,400. Then we had the Credit Crunch and property prices continued to fall until May 2009, where they averaged £121,300 .. but look where they are now…  £139,700.

The point I am trying to get across is long term future property values are more helpful to landlord investors than the month by month headline grabbing micro movements in the property market.  Look at the graph and you will see the growth in property values is an upward trend BUT, the average darts about as each month goes by.  So don’t watch the property indexes and panic if values drop next month or the month afterwards, because even in the glory days of 2001 to 2004 and 2012 to 2014, without fail, values always dropped slightly around Christmas, but people will always need a roof over their heads, and if they can’t buy and the council aren’t building anymore  .. only buy to let landlords can meet that demand.

Huddersfield landlords are being hit in the pocket with the new up and coming taxation rules and yes we might have a bumpy ride on the run up to Christmas (because of the points raised earlier), Brexit or no Brexit, but the trend will be a slow and steady upward momentum of property values, demand for rental properties and yields in the Huddersfield property market into 2017 and beyond.

What is really happening in the Huddersfield Property Market?

Well its been a few months since Brexit and as we settle into the Autumn with Great British Bake Off, Strictly and the Football season ... the newspapers are returning to their mixed messages of good news, bad news and indifferent news about the Brit’s favourite subject after the weather ... the property market.

The thing is the UK does not have one housing market. Instead, it is a patchwork of mini property markets all performing in a different way. At one end of scale is Kensington and Chelsea, which has seen average prices drop in the last twelve months by 6.2% whilst in our Yorkshire and Humber region, house prices are 5.5% higher. But what about Huddersfield?

Property prices in Huddersfield are 4% higher than a year ago

and 0.8% higher than last month.

So what does this mean for Huddersfield landlords and homeowners? Not that much unless you are buying or selling in reality. Most sellers are buyers anyway, so if the one you are buying has gone up, yours has gone up.  Everything is relative and what I would say is, if you look hard enough, there are even in this market, there are still some bargains to be had in Huddersfield.

However, the most important question you should be asking though is not only is what happening to property prices, but exactly which price band is selling? I like to keep an eye on the property market in Huddersfield on a daily basis because it enables me to give the best advice and opinion on what (or not) to buy in Huddersfield.

If you look at Huddersfield and split the property market into four equalled sized price bands. Each price band would have around 25% of the property in Huddersfield, from the lowest in value band (the bottom 25%) all the way through to the highest 25% band (in terms of value).

• Nil to £100k                        462 properties for sale and 190 sold (stc) i.e. 29% sold
• £100k to £150k                  404 properties for sale and 227 sold (stc) i.e. 35% sold
• £150k to £260k                  409 properties for sale and 218 sold (stc) i.e. 34% sold   
• £260k +                                377 properties for sale and 125 sold (stc) i.e. 24% sold

Fascinating don’t you think that it is the middle Huddersfield market that is doing the best?

The next nine months’ activity will be crucial in understanding which way the market will go this year after Brexit ... but, Brexit or no Brexit, people will always need a roof over their head and that is why the property market has ridden the storms of oil crisis’ in the 1970’s, the 1980’s depression, Black Monday in the 1990’s, and latterly the credit crunch together with the various house price crashes of 1973, 1987 and 2008.

And why? Because of Britain’s chronic lack of housing will prop up house prices and prevent a post spike crash. ... there is always a silver lining when it comes to the property market!

The 15,448 Huddersfield Savers batten down the hatches with low interest rates set to continue into the 2020’s

The 15,448 Huddersfield Savers batten down the hatches with low interest rates set to continue into the 2020’s

 

For those who have saved throughout their working lives and are looking for ways to maximise their savings, tying their money into property could prove advantageous. You see as a saver, I did a search of the internet and the best savings rate I could find was a 5 year fixed rate at 2.5% a year with Weatherbys Bank. Your £200,000 nest egg would earn you £5,000 a year – not much. However, on the other side of the fence, growth in Huddersfield house prices and princely buy to let yields have made property investment in Huddersfield an appealing option for many. According to my research.

 

You might ask, what has the predicament of the Huddersfield savers to do with the Huddersfield Property Market … everything in fact.  Read the newspapers, and every financial wizard is stating that with the decision of the Bank of England’s Monetary Policy Committee in early August to cut the Bank of England base rate to an all time low of 0.25 per cent, savers should prepare themselves for interest rates to stay low well into the early 2020’s.

 

... And this isn’t some made up story to capture the headlines of newspaper editors. The interest rate or return (on 10-year Government bonds is currently 0.61 per cent. This indicates that the money markets believe that the Bank of England’s base rate will, on average over the next ten years, be below the 0.61% rate they are buying the 10 year bonds at (because they would loose money if the average was over 0.61%). UK Interest rates are going to be low for a long time.

 

 

The average Yield for the last five years for

Huddersfield Buy to let property has been 4.6% a year

 

… and average Property Values in over the same period have risen by 12.2%.

 

Using these averages, the Huddersfield landlord’s property would be worth £224,400 and they would have received a total of £46,000 in rent – making the total return £270,400. Temporarily, whilst our 15,448 Huddersfield Saver’s, using the average savings rates for the last 5 years, even if they had reinvested the interest, their £200,000 would only be £221,184.

 

There are risks as well as benefits to buy to let though. As my blog readers know, I tell it like it is and investing in buy to let means locking up capital in a property that may fall in value. Another option would be stock market income based investment funds, which are paying around 5%, especially if put your nest egg into a tax free Stocks and Shares ISA.

 

The other side of the coin is that you cannot buy an unloved ‘stock market income based investment fund’ and set about renovating it and adding value yourself. It isn’t bricks and mortar ... and that is why my fellow Huddersfield homeowners and Huddersfield landlords why the love affair of the British and Property will continue.

 

https://huddersfieldproperty.blogspot.co.uk/

525% - Rise in Huddersfield Property Prices since 1981

525% - Rise in Huddersfield Property Prices since 1981

 

Roll the clock back 35 years to 1981, and Mrs. T was in power, we had a Royal Wedding, Britain won the Ashes and Bucks Fizz won Eurovision with ‘Making your Mind up’.   Haven’t things changed.  The number of homeowners and property investors who said they wish they had hindsight and bought up every house in Huddersfield all those years ago, especially when you consider what has happened to Huddersfield property values, as…

 

Huddersfield Property Values since 1981 have risen by 525%.

 

Not bad when you consider inflation over the same time period has been 271.9%, meaning in real terms (i.e. after inflation), property values in Huddersfield are 253.1% higher.   It’s no wonder people can’t afford to buy property anymore and landlords are attracted by bricks and mortar. Yet the changes to the Huddersfield Property market run much deeper than property value changes as no one could have predicted how the property market has changed in Huddersfield over the last 30 years.

 

Looking at the Local Authority data for Kirklees Council in 1981, 27.1% of Huddersfield people lived in a Council House, whilst today its 15.3% ... a massive drop which can mostly be attributed to Margaret Thatcher allowing Council tenants the right to buy their Council House.  The private rental sector since 1981 has, as one would have expected, also changed.  The proportion of properties privately rented in the Huddersfield area (i.e. through a private landlord or a letting agency) have almost doubled, rising from 8.8% to 15.5% of property.

 

So, let us consider those people who own their own home, surely that has had a massive drop?  In 1981, the proportion of people who lived in the Kirklees Council area who owned their own home was 63.9% … and today its … 67.1%. Not the seismic change most of you were expecting (including myself!).

 

Homeownership in the 1980’s and 1990’s in Huddersfield did in fact rise, but as I have discussed in previous articles in the ‘Huddersfield Property Market Blog’, that was because nearly every Council tenant was buying their council house. Now there are hardly any Council houses for the younger generation to move into (because of the right to buy scheme) so they have no choice but to privately rent.

 

.. and this is why the buy to let market in Huddersfield is an investment sector that will continue to grow as councils aren’t building council houses in their thousands each year (like they were in the 1950’s/60’s and 70’s).  The Huddersfield property market is constantly changing and buy to let for too long has been heavily dependent on house price growth, where yield has been almost forgotten.  I see the changes in tax and landlord and tenant law in a different perspective to the sooth-sayers and see it as bringing many opportunities where yield will become more important.  You might need to change your buy to let targets, your methodology to financing or even consider places other than Huddersfield in which to invest your money, but this will shine a light on investing in properties with healthier yields and create more realistic long term buy to let opportunities, instead of short term growth bets and wagers.

 

Like Bucks Fizz said in their song, it’s time to make your mind up. The advice I give to my landlords, and also to you my blog reading friends is this; these changes will make some landlords panic, meaning competition for decent Huddersfield buy to let bargains will reduce as fear of change kicks in and amateur investors flee the market.  These opportunities will provide a more stable platform for knowledgeable and wise Huddersfield buy to let landlords to thrive in.  If you want to learn more about the Huddersfield Property Market, feel free to pop in for a coffee at our office for a chat with me, or failing that, visit the Huddersfield Property Blog, where you will find many more articles like this solely on the one topic of the Property Market in Huddersfield