Huddersfield Property Market What is going to happen to Stamp Duty on 11th March?

If you are buying a home in England costing more than £125,000, you will have to pay Stamp Duty Land Tax on the purchase of your new home. In the provinces, it’s called something slightly different, so if you are buying a property in Scotland over £145,000 you will pay Land and Buildings Transaction Tax (LBTT) and for any property over £180,000 in Wales you will pay Land Transaction Tax (LTT). Whatever the tax is called, it is an important factor when moving, when you consider that

Last year the average UK house buyer paid

£10,150 in Stamp Duty Tax alone

Now as soon as the date for Rishi Sunak’s budget was set for 11th March 2020, conjecture in the Press began about what stamp duty changes he may disclose on budget day. The Chancellor only sets the budget for England and Northern Ireland, yet this is just as relevant for Wales and Scotland. Even though Derek Mackay, the Scottish Finance Secretary said on 6th February he has no plans to change Scotland’s version of Stamp Duty (LBTT), more often than not, Stamp Duty rule changes in England are often adopted in Wales and Scotland at a future date.

Some are asking if Sunak will impose what was promised in the Conservative manifesto with the 3% additional Stamp Duty surcharge on non-UK resident buyers? I have certainly heard in the Estate Agent community that foreign buyers are trying to rush through their sales in central prime London (Park Lane/Mayfair etc etc) before 11^th March to ensure they don’t get hit with a new tax. Or will he go even further, and will we see a reappearance of Boris Johnson’s hitherto specified aim of eliminating Stamp Duty below £500k, consequently theoretically saving homebuyers many thousands of pounds?

However, opinions are divided on what, if anything, will be included in the budget.

Most believe that the extra 3% for foreign nationals is an almost certainty, and if it isn’t implemented straight away, it will be in the Autumn Statement. Many believe the Chancellor could also decide to repay the favour to those in the North who turned the Election map ‘blue’ on the evening of 12^th December with actions to enhance the housing market north of the M62 with stamp duty changes. The best way he could do that is to raise the threshold from the current £125k.

When Boris ran for Tory leadership back in May 2019, he said that he wanted to expand the threshold at which you begin paying stamp duty from £125k to £500k, which when you consider 7 out of 8 residential sales in 2019 were for homes below £500k, that would have a considerable effect. If the Stamp Duty threshold had been raised to £500k in 2019, then 700,400 homebuyers in England would not have paid any Stamp Duty Tax.

97.4% of Huddersfield properties sold last year were below £500k

Of the 3,549 properties sold in the last 12 months in Huddersfield, only 91 of those properties sold were over £500,000 (interesting when compared with Greater London where 44.9% of properties were below the £500k level).

Yet the cost to the HM Treasury would be significant. If all properties below £500k were exempt, the government would lose £2.22bn in tax receipts according to Savills. Of course, this could be made up with extra tax on empty properties or increasing the second homes Stamp Duty levy from the current 3% to say 5%, which would raise an additional £1.12bn on top of the current £1.68bn it raises for the Treasury, yet it would have a negative effect on buy-to-let landlords buying additional homes.

What almost unquestionably won’t happen is the earlier idea of switching the Stamp Duty liability from homebuyer to home seller

this would stall the property market, would probably cause political fallout among 688,300 homebuyers who paid Stamp Duty last year alone, make homes ‘appear’ more expensive as house sellers would inflate the asking price to try and recoup some of the tax, yet ultimately could be seen as ‘re-arranging the deckchairs on the Titanic’.

The 3% additional levy for foreign buyers is almost certain (of which we don’t get many in Huddersfield – as they tend to buy in prime London areas which is of course the City of Westminster and the Royal Borough of Kensington & Chelsea, and parts of the boroughs of Hammersmith and Fulham, and Camden), yet I have a feeling that ultimately the Government doesn’t want to rock the boat on the wave that is being rode by the property market on the ‘Boris Bounce’ since December. I also doubt any changes will be made to first time buyer Stamp Duty relief, as 22% of all property transactions in 2019 were to first-time buyers, and whilst it cost the Treasury (or saved the first-timer buyers) a total of £539m in Stamp Duty relief (an average of £2,411 each), the Government are keen for first time buyers to get onto the housing ladder.

Ultimately, we can only wait until Mr Sunak opens his red leather box on 11^th March to find out what will happen. I will of course report back after 11^th of March on what (if any) changes to the tax regime will affect the Huddersfield property market going forward

Huddersfield Property Market – Is it Time to ‘Plan’ to Get the Builders In?

Even though the new legislation was placed on hold because of the recent General Election, it is expected the Government will start fining around half of all UK local authorities for failing to build enough new homes as Westminster starts to force local authorities to build more homes with the new laws.

The Conservative Government has gone on record with an ambition to build 300,000 new homes each year from the mid-2020s (aspiring as the average for the last 13 years has only been 177,000 pa). So Downing Street see the planning system as requiring root and branch change to ensure local authorities deliver on that promise.  The Ministry of Housing, Communities and Local Government’s ‘Housing Delivery Test’, which should be launched on an undetermined date this year, will hold local authorities to account for ensuring they hit their own specific house building targets.

If a local authority is unable to show that it has a five-year stock of land for building new homes, it gives builders greater rights and liberties to build their new homes where the builder wants (not where the local authority wants).

This will mean there will be a house-building free-for-all

as the council will have less control over the setting, types of properties, contribution to infrastructure and location of any new home development.

Only 44% of local authorities have a local plan that is less than five years old.

Locally, Kirklees is in that 44% of local authorities, having had a local plan in place within the last five years.

Yet, the original question of this article was to find out if we are building enough homes in Huddersfield and the surrounding local authority area i.e. should we get the builders in? Well, the Government set targets for local authorities for the number of homes they should build each year. The latest set of data is for 2018, so for the three years up to and including 2018 i.e. 2016/2017/2018,

New home building target for Kirklees was 4,516 new homes, yet it achieved 3,399, a shortfall of 1,117 new homes

So, what does that all mean for the Huddersfield property market?

Even with the shortfall, there are positive and negatives to this. The Huddersfield property market is not broken, yet it does need to get the builders in. Irrespective of the results from the last three years, we have over three decades of under building, which has created issues regarding affordability of homeownership and older generations being stuck in homes too big because there aren’t enough suitable homes for them to move to, i.e. bungalows. The stabilisation of the General Election has been a net positive to overall confidence in the local property market, meaning Huddersfield homeowners and Huddersfield landlords looking to sell their home in the coming spring and summer will find decent demand (although sellers still need to realistic with their pricing).

Unfortunately, the negatives are that many Huddersfield renters that want to buy, are unable to as they can’t save after paying their rents and feel as if they’ve been left behind. I know the Government recently launched their “First Homes” scheme for selected first time buyers at the start of February, where a 30% discount would apply to “a proportion of new homes” and would be subsidised out of contributions from builders, the Tory’s have previously promised to build 200,000 cut price homes for first time buyers back in 2015, yet the National Audit Office has recently confirmed they never built a single one!

The simple fact is, we as a country need to build far more affordable homes in the areas where people want them. This means the dream of homeownership will be a greater possibility for our children and grandchildren in the future. Our local authority needs to continue to plan the housing needs (and associated infrastructure) to ensure that as we live longer and continue to grow as country - we have the homes in place to live in that are suitable for every generation.

Huddersfield Homeowners £2,047,552,000 Windfall Since 2014

In the latest, and most recently published, set of UK mortgage data (for the month of November 2019) 18,470 pound-for-pound re-mortgages were made (i.e. the borrower went from one rate to another with no additional borrowing).

However, since the 1970’s, the British have seen their homes as cash cows and cash machines, with many homeowners re-mortgaging at the end of their mortgage’s introductory term (usually after the initial two, three or five years) to avoid being passed on to their mortgage lender’s more expensive standard variable rate.

For some borrowers re-mortgaging allows them an opportunity of raising additional cash whilst for others it enables them to follow interests and activities; such as big holidays, home improvements, new cars, debt consolidation or financially helping family members (e.g. paying off credit cards or helping with house deposits).

Interestingly, in November 2019 alone (the most recent figures) an eye watering £957,856,700 was borrowed on top of existing mortgages by 18,610 UK homeowners re-mortgaging and borrowing, on average, an additional £51,470. Therefore, one has to ask, are we borrowing too much? Looking at these numbers, one might think we are over-extending ourselves, yet as regular readers of my blog about the Huddersfield property market will know – I like to drill down and look at the historical figures. Back in 2006, just before the crash, British homeowners were actually borrowing in excess of £5bn per month over and above the re-mortgage amount – much more than the £1bn we experienced in November!

Looking at statistics from the Bank of England for the UK as a whole, even with the data mentioned above, British property owners have increased the equity in their homes by just over £270 billion since 2010 compared with a £275 billion withdrawal during the 2000s. This reveals that the last decade (the 2010’s) is the first since records began in which Brits have increased their equity. This is partly due to the fact that the number of housing transactions crumpled during the Credit Crunch, and many homeowners chose to reduce their mortgages, rather than continually increasing them - even if their property started going up in value after 2013.

So, what has happened in Huddersfield regarding mortgages and does it match the national picture? Well interestingly…

Huddersfield homeowners have injected just over two billion pounds into their Huddersfield properties over the last six years; overturning a trend stretching back to the 1970s.

Nationally, the total value of mortgages has increased slightly since 2014, yet as can be seen in the Huddersfield table below, this has dropped locally. Add that increase of equity to the increase in property values since 2014 and Huddersfield homeowners and Huddersfield landlords have grown their equity in the last 6 years by £2,047,552,000 (one might call it a windfall?).

It can quite clearly be seen that the financial insecurity sparked by the Credit Crunch crisis has created a generation of Huddersfield homeowners/landlords who are savers and improvers rather than movers and excessive borrowers, using excess cash to invest in their property and pay down debt or to excessively borrow on their equity growth, as can be seen on the graphs and table.

	2014	2020
Total Value of Property in Huddersfield	£11,264,847,000	£13,277,688,000
Total Mortgages in Huddersfield	£2,106,473,800	£2,071,762,800
Total Equity in Huddersfield Property	£9,158,373,200	£11,205,925,200
% of loan/mortgage to value (the LTV)	18.70%	15.60%

As the percentage of mortgages (the loan to value) has decreased since 2014 from 18.70% to 15.60% in Huddersfield, this is good news for every Huddersfield homeowner and Huddersfield landlord because, irrespective of whether the ‘Boris Bounce’ is short or long lived, it shows the Huddersfield property market is in a better state than ever before to ride out any storm that it might encounter because less people will be in negative equity or have prohibitively high mortgages.

Huddersfield Landlord’s £19m Tax Bill

I am asking Barry Sheerman the Labour Co-op MP for Huddersfield to remind the Chancellor Sajid Javid and Prime Minster Boris Johnson to use their persuasive skills to highlight and take a more holistic approach and attitude to the private rented sector and tackle issues which affect a Huddersfield landlords’ capability and capacity to strategically run an effective buy-to-let business.

For the last thirty years, the Government have passed responsibility of housing the masses from local authorities (i.e. council housing) to the estimated 1.5 million British buy-to-let landlords.

However, since 2015/16, Huddersfield landlords have faced increasing tax burdens as each year goes by, with the removal of mortgage interest rate relief on income tax (Section 24), the introduction of the 3 percent surcharge on stamp duty, and the reduction of the letting relief on capital gains tax. 

My research has calculated the total income tax contribution by 4,990 Huddersfield private landlords in the tax year 2015/16 was £13,022,896

However, the eradication of higher rate mortgage interest relief (also known as Section 24) announced in 2015 by George Osborne has been estimated to add a further £1.9 billion nationally to landlord’s tax liability. Whilst raising money from landlords is an easy target, and the tax receipts attractive, it does make the landlords financial burden even heavier.

And by 2021/2, when the full extent of the Section 24 relief kicks in, that income tax liability will rise to £19,013,428

for those Huddersfield landlords

This doesn’t even take into account additional liabilities such as Capital Gains Tax, the 3% additional duty on top of the prevailing Stamp Duty Land Tax and VAT.

Ambiguity and a lack of certainty is the foe of all investment, which has been seen with Brexit. Now, just as things are starting to get rosy in Q1 with the pent-up demand released with the ‘Boris Bounce’, the last thing we need as a ‘collective’ property industry is for the Government to see us landlords as a constant cash cow. This new Tory government must acknowledge the value the majority of private landlords offer by housing in excess of 9.45 million people in the country.

Westminster needs to take a balanced approach to the significant issues of possession (especially with the impeding removal of section 21 evictions), taxation and all rental properties needing to be at least an ‘E’ energy efficiency rating, to connect the value the private rented sector offers the country by effectively housing over a fifth of the population and avoid unintentional consequences by making renting a private rented property harder for tenants … because, it’s not financially viable to buy (or retain) a buy-to-let property with the way things are going against the landlord.

Huddersfield Property Market … the Rollercoaster of the last Decade

Ah the 2010’s, the tens, the teens - I am not sure what we are supposed to call the decade that has just gone. No matter what it was called, the last decade was a tough one, so does it really matter that we never really got around to giving it a name? Some might say, whatever one calls it, coming to an end is the most fundamental job any teen (and I refer to all humans) could possibly do!

The last two decades have certainly been tumultuous. At least for this decade we have just started we can say, in a few decades time, things like “That style is so ’20s” and fellow humans will essentially know what you are talking about. If you come of age in this decade, you will be a ’20s child and we will discuss ’20s politics and ’20s style and all the things that hadn’t been created on the 31st December 2019; the time that two nameless decades ended and how finally there was something everyone in the UK could agree on: the name of the decade. Hey - it’s a start!

So, what has happened to the local Huddersfield property market in the last nameless decade?

The average Huddersfield property has risen in

value from £156,800 to £188,000 in the last 10 years

… meaning each Huddersfield homeowner has seen a profit of £60.00 per week for those last ten years. Rolling the clock back to the start of the last decade January 2010, and the economy (and housing market) were recovering from the Credit Crunch and the worldwide financial crisis. A decade on and things feel a little different. If you bought a Huddersfield home over the past 10 years, things have certainly changed.

Huddersfield property values rose 19.8% on

average over the last decade

yet taking inflation into account, they fell in real terms by 13.2 per cent.

Compare that to a 42.5% rise in the ‘80s, a 13.2% drop in the ‘90s and rise of 62.8% in the 2000s in real terms. So, in real terms after inflation, there has been a decrease in house prices in Huddersfield in the past decade making homes today more affordable than a decade ago.

On average, 1.12 million homes were sold each year last decade, although that was 26.4% less than the decade before (the noughties) when an average of 1.52 million properties were sold annually.

So, what are the underlying issues in the Huddersfield (and wider UK) property market when, in real terms, property is essentially cheaper than a decade ago?  Whilst the newspapers tell us first time buyers can’t get on the housing ladder and the housing market is in gridlock - what is the problem? Well I am a firm believer in the adage ‘bad news sells newspapers’ because the truth is something completely different as 32.7% of homes last year were bought by first time buyers compared with only 22.8% in 2009.

Yet, there are still issues; mainly a persistent lack of not building enough new homes which curtails the supply and choice of property; but stagnated wages, stiffer mortgage rules and homeowners not moving as much as previous generations are all contributing to the problem. In the UK, the number of homeowners who moved in 2019 was around 14% higher than in 2009, yet this was still just under 50% lower than the average for the noughties. It’s all up and down like a rollercoaster!

My thoughts for the future are based primarily on what will happen to interest rates. Throughout the last decade, the Bank of England base rate was 0.5% at the start and was cut to 0.25% in the Summer of 2016. Even with the increase to its current level of 0.75% in the Summer of 2019, it has made borrowing money on a mortgage very cheap indeed. Nonetheless, bank/mortgage rates will rise again and I am concerned about the effect upon the housing market. Now it won’t be as bad as previous times when mortgage rates went up in the 1970’s and 1980’s (with mass repossession) because the tougher mortgage rules introduced in April 2014 will have ensured borrowers were stress tested on their affordability if interest rates shot up.  Most borrowers have been stress tested on their affordability to mortgage rates of up to 6% - 6.5%, which would obviously squeeze household disposable incomes yet stop people losing their homes due to repossession. Whilst I am not giving advice, just personal opinion, if you are one of the 29.3% of homeowners who isn’t on a fixed rate – maybe you should seriously consider doing so?

The 2020’s will be an interesting decade – and if you want to be kept up to date with what is happening in the Huddersfield (and wider UK) housing market – follow me and this blog to read similar articles to this one.

Will There Be a ‘Boris Bounce' For the Huddersfield Property Market?

The Halifax announced in early January that there was a Boris Bounce in the national property market as they stated national property values soared 1.7% in December 2019 - the biggest rise since the 1.9% month on month rise in February 2007 (a few months before the Global Financial Crisis aka the Credit Crunch).

Get the flags out - all hail Boris as the Conservatives gain their landslide general election triumph - the Boris Bounce is here … or is it?

The Halifax (as well as the Land Registry and other house price indexes) use data of property that has sold and completed (completion being when monies and keys of homes sold are transferred). The Halifax data was based on properties that completed in December 2019, and as anyone who has sold or bought a Huddersfield property in the last 10 years knows, the time it takes from agreeing a buying price to handing over the money is many weeks. In fact, the average length of time between sale agreed and completion in the country is running at 19 weeks, meaning the figures mentioned by the Halifax are for sales agreed in July / August 2019. This growth relates to what was happening to the property market in Summer 2019.

One of the most important things for the property market is confidence. Interestingly, Rightmove reported a 28% surge in buyer enquiries between the 13th December and 18th December. After a couple of years of Parliamentary hold-up, the confidence following this general election is unquestionably a much needed boost for the economy (and ultimately confidence), so much so, shares in the new homes builders Barratt jumped 14% and Persimmon 12% the day after the election, showing a property sector anticipation that the property market is about to move forward as suppressed demand for people moving home is liberated. 

Looking at the previous elections, I decided to look at what happened to property values in Huddersfield in the 12 months after each election, with some interesting results.

General Election Year	% Change in Huddersfield House Prices 12 Months After the Election
2001	17.7%
2005	9.0%
2010	-0.7%
2015	4.9%
2017	2.9%

So, with past experience, a general election generally has a good effect rather than a worse effect on the Huddersfield property market.

Looking at the rest of 2020, my intuition tells me in the better areas of Huddersfield, it will likely be a seller’s market, as they will have more influence to ask for higher asking prices from Huddersfield property buyers that have placed plans to move on hold for far too long - and this could push up Huddersfield property values more promptly in the short term.

Yet, as more Huddersfield properties come on to the market in the usual spring rush, we could see Huddersfield home buyers having more choice and thus, as supply increases yet demand remains the same, buyers will get more power to negotiate a better deal. Irrespective of that, there is still the all-encompassing issue that I have spoken about many times in my blog of not enough homes being built to keep up with the number required, meaning negotiating power and prices being inflated.

The bottom line is, the Huddersfield housing market will get a slight boost from the general election. The threat of a Jeremy Corbyn government obstructed some Huddersfield landlords to build their buy to let portfolio in the later parts of 2019, so as long as sellers remain realistic with their pricing and present their properties in the best light, 2020 in the Huddersfield property market should be a year of ‘steady as she goes’.

P.S .One final thought - remember what I said about the Halifax price Index being 5/6 months behind the times - don’t be alarmed when they announce in the March/April/May a reduction in property values - like I said before - this will be the prices achieved in the later parts of 2019 i.e. not what is happening right now.

165 Huddersfield Landlords each risk a £5,000 fine in Spring 2020

Washing Machine Energy Ratings for Houses was the phrase one Huddersfield landlord told me a few years ago when we were talking about the colour bar chart graphs that every property has had for over 10 years now. Now these weren’t brought in to use the whole palate of ink in people’s printers, but to increase the energy efficiency of the UK’s housing stock.  The vast majority of Huddersfield landlords are, by now, acquainted with the legislation that came into force on the 1^st of April 2018, that means all new and renewed private tenancy agreements must have an Energy Performance Certificate (EPC) rating of E or above, otherwise it would be illegal to rent the property out (EPC ratings go A to G – A being the best and G the worst).

Yet, from 1^st April 2020, those rules will be extended to also cover existing Huddersfield tenancies, meaning that under the new legislation, properties with an EPC rating of F or G will be classed as unrentable – meaning it will be illegal to rent the property and the landlord will be liable for a fine of £5,000.

It will be illegal for any landlord to let any Huddersfield Rental property with an EPC rating of F & G from April 2020

Back in 2018, there was a loophole for Huddersfield landlords of F & G rated rental homes on new tenancies, where they did not need to upgrade the property for five years if it cost them money (called the ‘no cost to landlord’ exemption rule) – yet back in April 2019 this exemption to improve rental properties was removed – so they too are included in these new rules.

Therefore, this means that Huddersfield landlords must use their own cash to cover the cost of improving their Huddersfield property to at least an EPC band E, and we aren’t talking about an insignificant number here….

165 Huddersfield (HD1) properties will be illegal

to rent out from the 1st April 2020

.. as they have energy ratings of F and G.

Now this requirement to upgrade the property is subject to a spending cap of £3,500 (including VAT) for each rental property, as landlords only need to spend what they need to, to improve their Huddersfield property to EPC rating E.

In cases where a Huddersfield landlord is unable to improve their Huddersfield property to EPC rating E within the £3,500 cap, then they still need to spend their hard earned cash and carry out the most appropriate measures which can be installed up to the £3,500 cap, and then register an exemption (with 3 quotes from 3 contractors) for their property on the basis that all relevant improvements have been installed and the property remains below an E.

Huddersfield homes such as some G rated flats on St Johns Road or some G rated terraced houses on Beech Street, Larch Road and Spring St will all be illegal to rent out by April

If you are a self-managing Huddersfield landlord or a landlord with another Huddersfield agent, then feel free to pick up the phone and chat through any concerns with regard to these new regulations, how to read a EPC graph, how to find the EPC rating of your home, in fact anything – call me. The last thing you need is a £5,000 fine on top of the £3,500 improvement bill.

One final thought though – it might be wise for Huddersfield landlords who have had their rental properties for a while now to get a new EPC carried out on their property (something we can help with irrespective of whether you are a landlord of ours or not) as recent research has also acknowledged that some early EPC’s understated the thermal efficiency of solid walls.  As countless Huddersfield rental properties are pre 1925, which is when most (not all) new properties were built with cavity walls, the Dept for Business, Energy and Business Strategy have now recalibrated EPC’s to give a truer result. This probably means that some solid wall properties, Victorian and Edwardian terraced houses and converted flats, presently rated F under an EPC will no longer demand any improvement works and certainly less building work may be required in the case of a G rated rental property.