Moving from a 2 bed Huddersfield Property to a 4 bed will cost you £870 pm

Moving to a bigger home is something Huddersfield people with growing young families aspire to. Many people in two bedroom homes move to a three-bedroom home and some even make the jump to a four-bed home. Bigger homes, especially three-bed Huddersfield homes are much in demand and it can be a costly move.

If you live in Huddersfield in a two-bedroom property and wish to move to a four-bedroom house in Huddersfield, you would need to spend an additional £220,183 (or £869.72 pm in mortgage payments (based on the UK Bank average standard variable rate)). However, going straight to a four bed from a two-bed home is quite rare as most people jump from a two to three-bedroom home, then later in life, from a three to four-bedroom home.

So, after being asked my thoughts on moving home in Huddersfield by a friend recently, please find my analysis of the local property market and then some thoughts. To start with, let us see what the average property price is for a Huddersfield property by the number of bedrooms it has.

Average Property Price in Huddersfield by Bedroom
1 bed	2 bed	3 bed	4 bed	5 bed
£67,333	£112,909	£167,207	£333,092	£468,053

I then decided to calculate what it would cost to make the jump upmarket from one bedroom to two bedrooms, two to three bedrooms etc, etc, both in actual money and in mortgage payments (using the current standard variable rate of UK Banks of 4.74% - so the mortgage cost could be higher or lower depending on the mortgage taken).

	Huddersfield
	Price Difference to make the move	Cost per month to move up market (Mortgage)
1 bed to 2 bed	£45,576	£180.03
2 bed to 3 bed	£54,298	£214.48
2 bed to 4 bed	£220,183	£869.72
3 bed to 4 bed	£165,885	£655.24
4 bed to 5 bed	£134,961	£533.09

There are some interesting jumps in costs when moving upmarket as a Huddersfield buyer. The cost of moving from one to two beds, and two to three beds is relatively reasonable, whilst the jump from three to four beds in Huddersfield is quite high (and hence why some four bed properties are taking slightly longer to sell nowadays). On an aside, a lesson here for all my landlord property blog readers, you can quite clearly see why the larger 4 and 5 bed properties don’t offer the best returns for buy to let because the monthly finance costs and rents achieved don’t match up so well (i.e. A mortgage for a 4 bed home in Huddersfield would cost you 99.21% compared to a 3 bed mortgage, but the jump in rent would be a lot less than that - although depending on your circumstances, 4 bed homes can offer other advantages to buy to let – pick up the phone if you want to know what they are in more detail).

So, coming back and looking at the stock of properties in Huddersfield, this also makes interesting reading …

Housing Stock in Huddersfield by Bedrooms
1 bed	2 bed	3 bed	4 bed	5 bed
15.91%	30.38%	30.25%	17.60%	5.87%

The most active purchasers are 20 something and 30 something home-owning parents with growing families. Many look to more modern developments for the perfect balance of access to decent primary schools, commutability and lifestyle. For landlords looking to buy within Huddersfield, they face stiff competition from these 20/30 something families, making the three bedroom Huddersfield home massively in demand, often attracting spirited offers and selling within weeks of listing. This mix of homebuyers and landlords is a pressure point in the Huddersfield property market.  Again, if you are a landlord, call me and I will show you areas with decent returns where you aren’t in so much competition with young Huddersfield family homebuyers.

Yet, the cost of an additional bedroom can be too much for some Huddersfield buyers. It is quite challenging moving home the first time, but to then find you are priced out on the next move up the ladder can be quite disconcerting, with families often having to move to a different part of town to get the bigger home they need.

Nevertheless, that’s the place many homeowners find themselves in with the cost of the additional bedroom being too much to bear. To those buying their home for the first time, all I suggest is they not only consider the mortgage payments and other costs of their first home, but also do their homework into their next rung up the Huddersfield property ladder. Thinking about it now will keep you ahead of the game in the future; as your number of bedrooms, family property needs and lifestyle wants change.

..and Huddersfield landlords – well these changes in the way people live also mean there are opportunities to be had in the Huddersfield rental market. Many Huddersfield landlords are starting to pick my brain on this, so if you don’t want to miss out – drop me a line.

Huddersfield Buy-to-Let Return / Yields – 2.6% to 8.1% a year

The mind-set and tactics you employ to buy your first Huddersfield buy to let property needs to be different to the tactics and methodology of buying a home for yourself to live in. The main difference is when purchasing your own property, you may well pay a little more to get the home you (and your family) want, and are less likely to compromise. When buying for your own use, it is only human nature you will want the best, so that quite often it is at the top end of your budget (because as my parents always used to tell me – you get what you pay for in this world!).

Yet with a buy to let property, if your goal is a higher rental return – a higher price doesn’t always equate to higher monthly returns – in fact quite the opposite. Inexpensive Huddersfield properties can bring in bigger monthly returns. Most landlords use the phrase ‘yield’ instead of monthly return. To calculate the yield on a buy to let property one basically takes the monthly rent, multiplies it by 12 to get the annual rent and then divides it by the value of the property.

This means, if one increases the value of the property using this calculation, the subsequent yield drops. Or to put it another way, if a Huddersfield buy to let landlord has the decision of two properties that create the same amount of monthly rent, the landlord can increase their rental yield by selecting the lower priced property.

To give you an idea of the sort of returns in Huddersfield...

Huddersfield Property type	Average Price paid (last 12 months) in Huddersfield	Average Rent Achieved in last 12 months in Huddersfield	Lower End of Yield Range in Huddersfield	Average Yield in Huddersfield	Upper End of Yield range in Huddersfield
Detached	£265,648	£885	2.62%	4.00%	4.84%
Semi-Detached	£153,675	£673	4.40%	5.26%	7.08%
Terraced	£115,703	£499	3.94%	5.18%	8.09%
Flats	£105,723	£539	4.74%	6.12%	7.07%

Now of course these are averages and there will always be properties outside the lower and upper ranges in yields: they are a fair representation of the gross yields you can expect in the Huddersfield area.

As we move forward, with the total amount of buy to let mortgages amounting to £199,310,614,000 in the country, landlords need to be aware of the investment performance of their property, especially in the era of tax increases and tax relief reductions. Landlords are looking to maximise their yield - and are doing so by buying cheaper properties.

However, before everyone in Huddersfield starts selling their upmarket properties and buying cheap ones, yield isn’t the only factor when deciding on what Huddersfield buy to let property to buy.  Void periods (i.e. the time when there isn’t a tenant in the property between tenancies) are an important factor and those properties at the cheaper end of the rental spectrum can suffer higher void periods too. Apartments can also have service charges and ground rents that aren’t accounted for in these gross yields. Landlords can also make money if the value of the property goes up and for those Huddersfield landlords who are looking for capital growth, an altered investment strategy may be required.

In Huddersfield, for example, over the last 20 years, this is how the average price paid for the four different types of Huddersfield property have changed…

·         Huddersfield Detached Properties have increased in value by 214.7% 

·         Huddersfield Semi-Detached Properties have increased in value by 222.2%

·         Huddersfield Terraced Properties have increased in value by 225.9%

·         Huddersfield Apartments have increased in value by 224.3%

It is very much a balancing act of yield, capital growth and void periods when buying in Huddersfield. Every landlord’s investment strategy is unique to them. If you would like a fresh pair of eyes to look at your portfolio, be you a private landlord that doesn’t use a letting agent or a landlord that uses one of my competitors – then feel free to drop in and let’s have a chat. What have you got to lose? 30 minutes and my tea making skills are legendary!

37.6% Drop in Huddersfield People Moving Home in the Last 10 Years

I was having a lazy Saturday morning, reading through the newspapers at my favourite coffee shop in Huddersfield.  I find the most interesting bits are their commentaries on the British Housing Market.  Some talk about property prices, whilst others discuss the younger generation grappling to get a foot-hold on the property ladder with difficulties of saving up for the deposit.  and Oothers feature articles about the severe lack of new homes being built (which is especially true in Huddersfield!).  A However, a group of people that don’t often get any column inches however are those existing homeowners who can’t move!

Back in the early 2000’s, between 1m and 1.3m people moved each year in England and Wales, peaking at 1,349,306 home-moves (i.e. house sales) in 2002.  However, the ‘credit crunch’ hit in 2008 and the number of house sales fell to 624,994 in 2009.  Since then, although this has steadily recovered,  since then, albeit to a more ‘respectable’ 899,708 properties by 2016.  This means there are around 450,000 fewer house sales (house-moves) each year compared to the noughties .  … Tbut the question is ... why are there fewer house sales?

To answer that, we needhave to go back 40/50 years.  Inflation was high in the late 1960’s, 70’s and early 80’s.  To combat thisat, the Government raisedset interest rates to a high level in a bid high to try to lower inflation.  Higher interest rates meant the householders monthly mortgage payments were higher, meaning mortgages took a large proportion of the homeowner’s household budget. However, thisat wasn’t all bad news sinceas the high inflation tends to eroded the mortgage debt in ‘real spending power terms’.  Consequently, as wages grew (to keep up with inflation), this allowed home ownersthem to get even biggeran even higher mortgages.  At the same time (whilst their mortgage debt was decreasing, ) and therefore allowing them to move up the property ladder quicker.

Roll the clock on to the late 1990’s and the early Noughties, and things had changed.  UK interest rates tumbled as UK inflation dropped.  Lower interest rates and low inflation, especially in the five years 2000 to 2005, meant we saw double digit growth in the value of UK property.  This inevitably meant all the home owner’s equity grew significantlyexponentially, meaning people could continue to move up the property ladder (even without the effects of inflation).

This snowball effect (of significant numberseveryone moving house) continued into the mid noughties (2004 to 2007), as Banks and Building Society’s slackened their lending criteria.  [You (who will probably can remember the 125% loan to value Northern Rock Mortgages that could be obtained with just a note from your Mum!!].  This ) meanting home movers could borrow even more to move up the property ladder.

So, now it’s 2017 and things have changed yet again!

You would think that with ultra-low interest rates at 0.25% (a 320-year low) (a 320+ year all time low), the the number of people moving would be booming – wouldn’t you ?  However, this has not been the case.  Less people are moving because:

with

(1) low wage growth of 1.1% per annum,

(2) the tougher mortgage rules since 2014

(3) sporadic property price growth in the last few years

( and (4) high property values comparative to salaries (I talked about this a couple of months ago)

What does this translate to in pure numbers locally?), all these four points have come together to mean less people are moving … but by how many?

In 2007, 9,524 properties sold in the Metropolitan Borough of Kirklees Council area and last year, in 2016 only 5,935 properties sold – a drop of 37.68%.

Therefore, we have just over 3,590 less households moving in the Huddersfield and surrounding Council area each year.  Now of that number, it is recognised throughout the property industry around fourth fifths of them are homeowners with a mortgage. That means there are around 2,943 mortgaged households a year (fourth fifths of the figure of 3,590) in the Huddersfield and surrounding council area that would have moved 10 years ago, but won’t this year.

The reason they can’t/won’t move can be split down into different categories, explained in abased on a recent report by the Council of Mortgage Lenders (CML). So, of those estimated 2,943 annual Huddersfield (and surrounding area) non-movers, based on that CML report -

1.      There are around 1,059 households a year that aren’t moving due to a fall in the number of mortgaged owner occupiers (i.e. demographics).

2.      I then estimate another 412 households a year are of the older generation mortgaged owner occupiers. As they are increasingly getting older, older people don’t tend to move, regardless of what is happening to the property market (i.e. lifestyle).

3.      Then, I estimate 177 households of our Huddersfield (and surrounding area) annual non-movers will mirror the rising number of high equity owner occupiers, who previously would have moved with a mortgage but now move as cash buyers (i.e. high house price growth).

4.      Finally, and the majority of people that would have moved (but can’t). I believe there are 1,295 Huddersfield (and surrounding area) mortgaged homeowners that are unable to move because of the financing of the new mortgage or keeping within the new rules of mortgage affordability that came into play in 2014 (i.e. mortgage).

TUndoubtedly,  whilst the first three points above (demographics, lifestyle and high price growth) areis somet hing beyond the Government or Bank of England control.  However could there be some influence exerted to help, it is the fourth point where something could be done , as it is the people and households in that final 4th point (the non-movers because of financing the new mortgage and keeping within the new rules of mortgage affordability?) Ithat if Huddersfield property values were lower, this would decrease the size of each step up the property ladder.  This would mean the opportunity cost of increasing their mortgage would reduce (i.e. opportunity cost = the step up in their mortgage payments between their existing and future new mortgage) and they would be able to move to more upmarket properties.

TAnd then there is the mortgage rules, but before we all start demanding a relaxation in lending criteria for the banks, do we want to return to free and easy mortgages 125% Northern Rock footloose and fancy-free mortgage lending that seemed to be available in the mid 2000’s ... available at a drop of hat and three tokens from a cereal packet?

We all know what happened with Northern Rock …. Your thoughts would be welcome on this topic.

Decreasing Numbers of Younger Homeowners in Huddersfield

Jeremy Hall, 38-year-old father of two from Huddersfield, was out house hunting. It was a pleasant August Saturday afternoon, and our man cycles along on his bike. He cycles up a street of suburban semis, where he spots a few retired mature neighbours, chatting to each other over the garden fence. He leans his bicycle against a lamppost and launches softly into his property search.

“Anyone on the road contemplating moving?” Jeremy asks, “I am not a landlord or developer, I’m just a Huddersfield bloke trying to get out of renting, buy a house, do it up and live in it with my wife and two children”

“The only way I will leave here is in a box”, answers an 80-something lady, wearing her fading Paisley patterned housecoat from the 1970’s.

“I‘ve lived here since before you were born, its lovely up here .. we aren’t moving, are we Doris?” (as her neighbour sagely shook his head at his wife).

Jeremy, like many Huddersfield people born in the late 1970’s to the early 1990’s, is keen to get a slice of prime Huddersfield real estate. Yet people like Jeremy in Generation Y (or the Millennials as some people call them i.e. born between 1977 and 1994 and needing family housing now) are discovering, as each year passes by, they are becoming more neglected and ignored when it comes to moving up the property ladder.

Over 75 percent of Brits aged 65 and above (the baby boomers) are owner-occupiers, the biggest share since records began and a proportional rise of over 48.3% since the early 1980’s. Looking at those Baby Boomers (the current 65+year olds)  .. and roll the clock back 36 years (to when they were in their 30’s and 40’s and two thirds (65.6%) of them owned their own home.

Whilst today, just under a half of 25 to 49 year olds (47.3%) own their own home.

However, the biggest drop has been in the 18 to 24-year old’s, where homeownership has dropped from a third (32%) in the 1980’s to less than one in ten (8.9%) today. Looking at the Huddersfield statistics, the numbers make even more interesting reading.

	‘Total Number of Households Occupied in The Age Range’ in Huddersfield	…and of that ‘Total Number of Households Occupied in The Age Range’– the number of those Owned in Huddersfield	… giving the Percentage of Households in That Age Range That Are Owned in Huddersfield
Head of Household 18 to 24 years old	3740	415	11.10%
Head of Household 25 to 49 years old	31550	18260	57.88%
Head of Household 50 to 64 years old	17401	13005	74.74%
Head of Household 65+ years old	16453	12333	74.96%

Government policy contributes to the generational stalemate. Stamp Duty rules prevent older Brits from moving as the price of land and planning rules make it harder to build affordable bungalows that are attractive to members of the older generation who want to move.

The average value of an acre of prime building land in the UK is between £750,000 and £800,000 per acre. Bungalows are the favoured option for the older generation, but the problem is bungalows take up too much land to make them profitable for new homes builders. The housing market is gridlocked with youngsters wanting to get on (then move up) the property ladder whilst the older generation, who want to move from their larger houses to smaller, more modern bungalows, can’t. The problem is – there simply aren’t enough bungalows being built and the high price of land, means they are prohibitive to build.

So, what is my point? Well, all I would say to the homeowners of Huddersfield is that one solution could be to start to talk to your local councillors, so they can mould the planners’ thoughts and the local authority thinking in setting land aside for bungalows instead of two up two down starter homes? That would free the impasse at the top of the property ladder (i.e. mature people living in big houses but unable to move anywhere), releasing the middle aged gridlocked people in the ladder to move up, thus releasing more existing starter homes for the younger generation.   

… and to you Jeremy … the wandering new home searcher – if things are going to change, it will be years before they do .. so keep going out and spreading the word of your search for a new home for your family.

Slowing Huddersfield Property Market? Yes and No!

My thoughts to the landlords and homeowners of Huddersfield…

The tightrope of being a Huddersfield buy-to-let landlord is a balancing act many do well at. Talking to several Huddersfield landlords, they are very conscious of their tenants’ capacity and ability to pay the rent and their own need to raise rents on their rental properties (as Government figure shows ‘real pay’ has dropped 1% in the last six months). Evidence does suggest many landlords feel more assured than they were in the spring about pursuing higher rents on their properties.

During the summer months, historic evidence suggests that the rents new tenants have had to pay on move in have increased. June/July/August is a time when renters like to move, demand surges and the normal supply and demand seesaw mean tenants are normally prepared to pay more to secure the property they want to live in, in the place they want to be. This is particularly good news for Huddersfield landlords as average Huddersfield rents have been on a downward trend recently. So look at the figures here...

Rents in Huddersfield on average for new tenants moving in have risen 1.6% for the month, taking overall annual Huddersfield rents 1.1% higher for the year

However, several Huddersfield landlords have expressed their apprehensions about a slowing of the housing market in Huddersfield. I think this negativity may be exaggerated.

Before we get the Champagne out, the other side of the coin to property investing is capital values (which will also be of interest to all the homeowners in Huddersfield as well as the Huddersfield buy-to-let landlords).  I believe the Huddersfield property market has been trying to find some level of equilibrium since the New Year.  According to the Land Registry…

Property Values in Huddersfield are 3.08% higher than they were 12 months ago, rising by 0.93% last month alone!

Yet, I would take those figures with a pinch of salt as they reflect the sales of Huddersfield properties that took place in early Spring 2017 and now are only exchanging and completing during the summer months.

The reality is the number of properties that are on the market in Huddersfield today has risen by 7.19% since the New Year and that will have a dampening effect on property values. As tenants have had less choice, buyers now have more choice ... and that will temper Huddersfield property prices as we head towards 2018.

Be you a homeowner or landlord, if you are planning to sell your Huddersfield property in the short term, it is crucial, especially with the rise in the number of properties on the market, that you realistically price your property when you bring it to the market ... with the increase in choice of properties, the balance of power during negotiation generally sways towards the buyer. Given that everyone now has access to property details, including historic stats for how much property have sold for, they will be more astute during the offer and negotiation stages of a purchase.

However, even with this uplift in the number of properties for sale in Huddersfield, property prices will remain stable and strong in the medium to long term. This is because the number of properties on the market today is still way below the peak of summer of 2008, when there were 1,227 properties for sale compared to the current level of 760 (if you recall, prices dropped by nearly 20% in Credit Crunch years of ‘08 and ‘09).

Compared to 2008, today’s lower supply of Huddersfield properties for sale will keep prices relatively high...and they will continue to stay at these levels for the medium to long term.

Less people are moving than a few years ago, meaning less property is for sale. Fewer properties for sale mean property prices remain relatively high and this is because of a number of underlying reasons. Firstly, buy-to-let landlords tend not sell their properties as often than owner-occupiers, consequently removing the property out of the housing market selling cycle. Secondly, Stamp Duty is much higher compared to 10 years ago (meaning it costs more to move). Next, there is a dearth of local authority rental housing so demand for private rented housing will remain high. Then we have the UK’s maturing owner occupier population, meaning these older people are less likely to move (compared to when they were younger). Another reason is the lack of new homes being built in the country (we need 240k houses a year to be built in the UK and we are currently only building 145k a year!) and finally, the new mortgage rules introduced in 2014 about how much a person can borrow on a mortgage has curtailed demand.

Some final thought’s before I go – to all the Huddersfield homeowners that aren’t planning to sell – this talk of price changes is only on paper profit or loss. To those that are moving ... most people that sell, are buyers as well, so as you might not get as much for yours, the one you will want to buy won’t be as much, (swings and roundabouts as Mum used to say!)

To all the Huddersfield landlords – keep your eyes peeled – I have a feeling there may be some decent buy-to-let deals to be had in the coming months. One place for such deals, irrespective of which agent is selling it, is my Huddersfield Property Blog ... https://huddersfieldproperty.blogspot.co.uk/