Is This a Good Time to Buy Your First Home in Huddersfield?

Should you wait to buy your first home in Huddersfield or buy now? What sort of mortgages are available? What sort of deposit is required? These are questions all Huddersfield buyers are asking at the moment, yet this week I would like to focus on Huddersfield first time buyers and what it means directly and indirectly to Huddersfield homeowners looking to move up the Huddersfield property ladder and Huddersfield buy to let landlords.

  

Well quite frankly, to answer that question it’s contingent on what Huddersfield property you are looking to move into and even more significantly, how long you are hoping to live in that property.

We have many armchair economists and even professional economists predicting Armageddon when it comes to the property market, yet the Huddersfield (and UK) property market is essentially very sound. Don’t forget the Chancellor himself, George Osborne warned that if we voted to leave the EU two things would happen. Firstly, the UK property market would crash and property values would drop by 18% in the two years after the vote. Secondly, there would be an ‘economic shock’ to the country’s economy that would increase the cost of mortgages (through increased interest rates as there would be a run on the Pound). UK GDP rose by £132bn in the two years after the referendum and interest rates actually dropped locally, with regard to property values …

Huddersfield house prices rose by 6% in the 2 years

following the Brexit vote

Lloyds have predicted an enormous 30% fall in property prices over the next 36 months whilst Savills have suggested a short dip of 5% during the summer, based on very low transactions numbers, with property prices bouncing back to be just over 15% higher in 5 years’ time. This assumes that the UK plc economic downturn is short & sharp, and that no substantial gap opens up between supply and demand in the property market (i.e. everyone doesn’t dump their property market all at the same time).

Huddersfield Property Values after the 2008 Credit Crunch crisis plummeted 13.3% between 2008 and the end of 2009.

Yet, the circumstances of the 2008/9 property crash were fundamentally different to today. Many ‘armchair economists’ assume there will be a re-run of the 2008/9 and 1988 property crashes in the coming 12 months in terms of house value falls. Yet, dissimilar to the last recession, this dip has not been led by previous years of strong property price growth like the other two crashes. House prices in many parts of the UK have been down in the last 12 months.

You would think Huddersfield first-time buyers who have already saved their deposit could grab a bargain in the coming months, you would believe they would have less competition in the market because of landlords holding back buying additional rental properties. This is because of the press speculation that rent arrears are sky high from tenants who are unable to pay their rent. Yet evidence from many professional bodies in the private rental sector state rent arrears across the whole of the Country are appearing to be very low indeed, despite Covid-19. 

Interestingly, the firm Yomdel who handles ‘web live chat’ and ‘phone support’ for thousands of estate and letting agents have reported national activity is higher than the two months of the Boris Bounce (in January and February 2020). The number of new buyer enquiries for the last two weeks is double (108.9% higher to be precise) than the 2019 yearly rolling average. New landlord enquiries are 32.1% higher than the 2019 average and tenants are 150.1% higher than the 2019 average ... these are all great signs and go against the doom monger economists.

My best advice to all Huddersfield property buyers is, be they second time buyers, first time buyers, landlords … whatever number buyers, they should buy with a medium-term view of future Huddersfield property values, instead of an expectation of always looking to making a quick few pounds flipping a property (i.e. selling it quickly).

Let’s not forget that mortgage interest rates are another important factor: they are at a 325-year low, so borrowing money has never been so inexpensive. If you know you are going to be living in your first (or second) Huddersfield home for five years and you want the peace of mind of knowing precisely what your mortgage payments will be, then it’s very attractive. At the time of writing, Barclays are offering any first-time buyer a 95% mortgage on a 5-year fixed rate of 2.95%. The average value of an average terraced house in Huddersfield is £127,700 and so with the 5% deposit of £6,000 on a 35-year term the …

Mortgage payments on a typical Huddersfield terraced house would only be £465 per month (i.e. much cheaper than renting)

Many lenders are lending money even if you are on furlough, yet you may find you won’t be able to borrow as much pre Covid-19. Interestingly, some mortgage companies will even take into account total income, where your employer is topping up the Government’s furloughed amount, whilst other lenders will consider mortgage applications on a case-by-case basis. The best advice I can give is, don’t assume what you can or can’t borrow. Speak to a whole of market mortgage broker, to see what is possible – not what your friend on Facebook tells you, what you can or can’t borrow.

You only need to put down a 5% deposit

for the property you would like to buy

If you think about it, it’s inconsequential if Huddersfield property values drop or not, or if they do drop whether they bounce back quickly (or not as the case maybe) because it’s impossible to know the bottom of the property market. I would say if you find the right Huddersfield property for you, at the price that feels right, that will be your home together and you are going live in that Huddersfield property for the next five to ten years, it’s not a bad time to be buying.  It is like waiting for the next piece of tech – there will always be a better model or an assumed better time. We are talking about your home here – a home for you and your partner and family, be that your kids, dog, cat, pet or favourite pot plant because …

Spending money on rent is all wasted money – at least when you buy your own home, you start to pay your mortgage off from day 1

So many first-time buyers use the Bank of Mum and Dad to help with their deposit, yet I have spoken to many parents who wouldn’t want to interfere in their mature children’s life and subsidise day to day expenditure, yet are embarrassed to offer their help with the deposit. If you don’t ask …you don’t get!

The Lockdown Landlords of Huddersfield

Despite Government regulations that have been in place since the 26 March 2020, where face-to-face viewings were made illegal, Huddersfield buy to let landlords have during that time been chomping at the bit to build their property empire by looking at buying additional properties for their Huddersfield buy to let portfolio.

There are plenty of investors who think nothing of legally committing to buying a property ‘off plan’ before it’s built – yet over the last few weeks, it has become the norm in the second-hand Huddersfield property market and they have now stolen a march and bagged some property bargains.

Normally, the face-to-face viewing is step one of the second-hand house buying process … yet now it’s becoming the ‘new normal’ that some Huddersfield agents are carrying out semi-professional video viewings or 360-degree video tours. Even homeowners are getting in on the act and managing a Facetime or Zoom video viewing by walking around their house with their mobile phone.

Yet the Government announced on Wednesday, 13^th May 2020 that the Estate & Letting Agency industry could reopen meaning people could view houses, visit agents and move home be they tenants, buyers, landlords or home sellers. This is all subject to general and specific social distancing rules, specific hygiene regulations and suitable PPE being used.

What has been happening in the last few weeks in the Huddersfield property market?

The average time between sale agreed and exchange/completion of contracts on a house sale (i.e. the keys and monies get sorted) is 17 to 19 weeks, which means buying today would mean you wouldn’t be getting your hands on the property until late September or October at the earliest.

Spring is the time when most properties come onto the market, yet as one would expect, the number of Huddersfield properties coming onto the market has been somewhat reduced since lockdown as..

Only 51 Huddersfield properties have been

put up for sale in the last month

This reduction in supply of new properties coming onto the market, combined with this pent-up demand from both Huddersfield landlords and the ‘Boris-Bounce’, could in fact be good news for the Huddersfield property market let me explain…

Rightmove stated that people going to their website initially dropped by 40% at the start of lockdown, yet now has recovered with a near doubling of people searching for properties with gardens (for both sales and renting). For many Huddersfield buy to let landlords (and in fact Huddersfield homebuyers), now is the very best time to do research into the Huddersfield property market. All the portals have access to 25 years of property sales with pictures, so you can compare and contrast what has happened to various different property types around Huddersfield to spot those under-priced bargains, meaning you can get moving quickly after lockdown.

Rather than feeling trapped or powerless, this time can be used fruitfully by Huddersfield buyers and Huddersfield sellers to get their ducks in a row

One of the biggest barriers in April was mortgage lending. In the early days of the pandemic, most mortgage lenders removed many of their best deals and enormously restricted their capacity. Currently though, we are seeing a revitalisation in the mortgage market. In May with many mortgage products becoming accessible again for borrowers, and with many mortgage companies integrating more digital processes, (including Virtual Surveyor Mortgage Valuations in some cases), the mortgage market now has plenty of options available to those who are keen to borrow.

There is no doubt the Huddersfield housing market got off to a sturdy start in 2020. With Brexit at least partly resolved, the ‘Boris-Bounce’ was starting to take off. With Huddersfield house prices being robust and rental demand was high, the Huddersfield property market was already in a good placed to deal with the subsequent Covid-19 issue.

I know there are a few doom mongers in the National Press spouting about a massive crash in the UK property market. There is a natural tendency for newspapers to latch onto the worst-case scenario in any economic forecast. Who can forget the country received similar projections in the lead-up to the 2016 Brexit vote with HMRC itself stating that UK house values would drop by at least 10% in the first 12 months should the UK vote for Brexit and 20% in two years!

With the rollercoaster of the stock market in recent months, investing one’s money into good old-fashioned bricks and mortar has started to seem a good place again.

Buying a property for investment means you have a tangible asset, something you can touch and feel (and understand). The returns from investing in property comes from both capital appreciation and income from the rent, and yes whilst property values can go up as well as down, successful buy to let landlords are inclined to take a long-term view on their property investments.

£349 per month

The average gross profit from a Huddersfield terraced/town house

To give you an example of the current buy to let returns, the average Huddersfield terraced/town house sells for £127,700, by taking the ‘The Mortgage Works’ BTL 5-year fixed rate of 1.64%, with only £1,5546 in up-front fees, a 20-year repayment mortgage would cost you £380 per month or interest only mortgage would cost just £106 per month  … considering the average rent for a terraced/town house in Huddersfield is £455 per month … even before management, tax, maintenance and other associated costs, that’s a decent gross profit (the £349 gross profit is an illustrative example using the interest only mortgage and the capital element would need repaying at the end of the term).

Isn’t it funny the newspapers aren’t latching on to some reports to say the property market might go in the other direction? Remember – bad news sells newspapers!

So, should you wait to buy your Huddersfield buy to let investment?

Before buying take into account factors like the strength of your financial future, your credit score and the current state of the property market and even more importantly, the state of the mortgage market. Look at the current interest rates, they have never been so low and deliberate the experts’ opinions and just as equally your own opinions as to whether Huddersfield property values are on the rise, will stay the same or are likely to fall.

Interest rates are at record lows, meaning borrowing money is cheap money now, so it may be a good time to buy, as you will pay a reduced cost for the pleasure of borrowing money to buy that investment. Yet, if you waited and Huddersfield property values are on the decline, it may be a good idea to wait, as you could end up getting a better deal on the same type of home, yet if that happens, access to the cheap finance might dry up (meaning you could save some of the purchase price, but the cost of borrowing could go up). It can be very hard to accurately predict what interest rates or property values will do, so these shouldn’t be deciding factors – but they are worth considering.

So, what will happen to the Huddersfield (and UK) property market?

To be honest – nobody knows. What I do know is the Swine Flu in 2009 caused some volatility in the UK property market, but the market stabilised within months. Even in disaster scenarios such as the current one, property remains comparatively stable and will continue to be one of the best places to invest in.

Yes, we could see unemployment rise in the next 6 months (yet the Furlough Scheme has been extended until the autumn) and historically, it has been proved house price falls are not caused by high unemployment; yes GDP will drop drastically because of lockdown yet it could bounce back like it has in China; yes, the number of property transactions will drop, yet that will only really effect the pockets of Huddersfield removal people, Huddersfield solicitors & estate agents and the Chancellor of the Exchequer in lost stamp duty receipts; yes there is £82bn worth of property sales on ice during this lockdown (some of which might not complete) .. it’s all ifs, buts and maybes.

Calamity changes things: with every predicament, humanity shifts to become more productive – it’s the way it’s always been

The national debt at the end of the Napoleonic Wars of 1815 in today’s money was an eye watering £4,421,000,000,000 (£4.42 trillion) and even with the eye watering borrowing to fund Covid-19, it stands at £1,821.3 trillion – we have been here before and we came out stronger.

The Bank of England failed in 1825, yet we recovered stronger, the Great Depression of the 1930’s cut the Stock Market by 90%, yet we recovered, WW2 took national debt to 200% of GDP like it had in the Napoleonic Wars in the early 1800’s – yet we recovered, the oil crisis quadrupled oil prices in the 1970’s – and we came back … the list goes on with hyper-inflation in the 1970s of 25%, mass unemployment in the 1980’s, Black Monday in 1987, Dot-com bubble in 2001 and the Credit Crunch in 2008/9.  

With every economic crisis, the long-term effects of them make people look at their decision making differently

The simple fact is for decades, demand for homes has outstripped supply – hence why property values have remained so robust. People are living longer  (71.1 years in 1960 and 81.1 years nowadays), the mass exodus of EU nationals has not taken place since Brexit and the birth rate has increased by 9.1% since the Millennium  which means since 2000, the country has needed at least 240,000 households per year to satisfy the demand. On average, we have only built 150,000 households a year, meaning we have a shortfall of 90,000 households each year for 20 years .. a true shortfall of 1.8m households .. and until we start building anything over that 240,000 requirement … demand will always outstrip supply – and we all know what happens to prices when that happens!

686 Huddersfield Families in Limbo Due to Coronavirus

An immediate fallout of the Coronavirus pandemic is that it has placed many Huddersfield families house moves on hold. Government guidelines state all house buyers and house sellers who are in the process of selling their Huddersfield house and moving to a new house must adapt to these temporary arrangements, adjusting their usual practices, agreeing different dates to the house move after the removal of the stay at home actions we are all adopting. In essence, putting the house move ‘on ice’ during lockdown.

However, where the house being moved into is vacant, Government guidance states that you can continue with this transaction although you must observe the Governments guidance on house removals. There are also exceptions allowed where existing accommodation becomes un-fit to live in (e.g. flood or fire) or occurrences of domestic violence. Thankfully, the Government have asked mortgage companies to extend the expiry date of any mortgage offer and the Law Society have implemented a standard legal process for delaying completion dates.

So, what does all this mean for the people of Huddersfield?  

This means the house moves of 686 Huddersfield families have been put on hold since the coronavirus restrictions brought the UK housing market mainly to a halt in late March.

These are Huddersfield properties where a sale was agreed between October 2019 and February 2020. During the time between sale agreed and completion, the properties are classified as sold subject to contract.  Interestingly, it has been taking upwards of 14 to 19 weeks from agreeing a sale to the move-in over the last few years. This means typically, these 686 property transactions mentioned above would have completed between April and June/July 2020 yet have now been placed on hold after the Government asked buyers and sellers to delay house moves where possible.

The value of Huddersfield property sold

subject to contract amounts to £128,554,000

The pandemic hit just as the Huddersfield market had been experiencing the Boris Bounce following his General Election landslide in December. It appears talking to my team and other agents in Huddersfield, just about every buyer and seller is happy to wait until the restrictions are lifted because they had been holding back their house move because of Brexit. Interestingly, many of the Huddersfield homeowners in limbo mentioned above are moving up the property ladder, and whilst being ‘in limbo’, it has made them realise more than ever that the homes they are moving from are too small for their needs and they are keen to crack-on with the sale once restrictions are lifted.

Finally, we cannot forget the tenants of Huddersfield. Currently there are 80 families looking to make that move, yet unable to as tenants are under the same restrictions as house buyers. This means they too cannot do a physical viewing nor can they move house during lockdown unless where existing accommodation becomes un-fit to live in, e.g. flood or fire or occurrences of domestic violence or the person moving is an essential worker. That doesn’t mean tenants cannot view the property virtually and prepare the paperwork in advance. In fact, many agents think the first Friday after lockdown will be the busiest ever moving day in the history of the UK as there will be a huge pent up demand to move on that date.

For more information on the Huddersfield Property Market – please follow me on social media for more up to date articles on the local property market.

8.4% of Huddersfield Workers Worked from Home Before Covid-19 – Wonder How Many More do Now?

Before the Covid-19 pandemic hit, 6,227 Huddersfield people worked mainly from home, or about 8.4% of Huddersfield’s 73,808 workforce (compared to the national average of 14.9%). Yet over the last few weeks many hundreds, even thousands more Huddersfield workers have joined them in their spare rooms or at their kitchen or dining room tables.

Amongst warnings from the Government that some lockdown constraints could stay in place into 2021, businesses are dealing with an unexpected cultural shift in how many of us do our work. Talking to many Huddersfield people who have been asked to work from home, for many it has been a pleasant success.

I have found myself still working at 8pm/9pm and beyond as I have forgotten to clock out and whilst many people might think working from home means doing less work, more often than not, the reverse is true for industrious and hardworking employees. When you don’t have that break of the commute to the office, the workday can blend into ones home life. Talking of commuting, the average British worker has a daily commute of 11.9 miles, whilst locally…

The average daily commute for a Huddersfield worker is 7.7 miles

At least working from home, the commute is only to the dining room table or spare bedroom. Speaking to some friends of mine that are new to working from home, they said to me that they can feel out of the office-loop as they miss the ‘water-cooler’ moments or spur-of-the-moment brainstorming session over a brew, it’s tough to reproduce that from home.

Don’t forget to get into your garden (if you have one), stretch those legs. Ensure you are taking advantage of the daily exercise allowance. I see so many people walking around our neighbourhood daily who I haven’t seen before. Let’s hope they keep up the habit once lockdown is removed. You have to admit, it’s quite nice especially as there are far less cars on the road.

Huddersfield workers commute 479,761 miles a day to work

That’s to the moon and back – every day!

Some people find it difficult to adjust to working from home and feel guilty if they don’t reply to co-workers emails or phone calls straight away. My friends stated that they didn’t want their team-mates to wonder if they were taking it easy rather than pulling their weight. The best advice I can give from working with my team, is to over communicate, and I suggested (as I do to you) to tell their bosses and colleagues what they are doing and share their accomplishments using those video conferencing software packages.

The really hard part is having a dedicated space in your home.  Attempt to set up a workspace and make it out of bounds to the rest of your household while you are working (although that is very difficult when you have children or your partner is having to work from home as well). Is there anything worse than being on an important call to your boss or a client, only to have a delivery driver knocking on the door or having your kids and dogs yelling and barking in the background? It’s a balancing act!

Interestingly, looking at the stats and this internment in Huddersfield people’s homes could be a catalyst for people wanting to move home later in the year be it for rent or for sale, thus giving a vital boost to the Huddersfield property market. Would it surprise you that…

21,574 Huddersfield households are either at full capacity

or officially overcrowded?

The definition of full capacity is when the household has enough bedrooms for the occupants. The definition is set out in ‘The Allocations Code of Guidance’, which recommends that the 'bedroom standard' is adopted as a minimum measure of overcrowding.

This means one bedroom should be provided for

·         each adult couple.

·         any other adult aged 21 or over.

·         two adolescents of the same sex aged 10 to 20.

·         two children regardless of sex under the age of 10

That means 31.2% of Huddersfield households do not have

a spare bedroom for their occupants to work from

(compared to the national average of 16.64% of household)

Even worse, I suspect there are many Huddersfield families with two teenage boys or two teenage girls, and guidance is suggesting they can share a bedroom – do they live in the real world? This means there are probably even more Huddersfield households that are at full capacity or even more overcrowded than the stats suggest, meaning plenty of people will be working from dining room tables (if they have a dining room that is) and quite probably the kitchen table … a recipe for even more people wanting to move home later in the year.

So, I don’t know how many Huddersfield people are working from home, yet looking at the newspapers the consensus is that it has at least doubled. For all the reasons mentioned in this article, this looks like we could have a pressure cooker scenario of demand for Huddersfield property once the restrictions have been fully lifted.

Meanwhile, a message to all you new homeworkers in Huddersfield. Working from home is a tough one. The best advice I can give is to change your way of thinking.  I know many friends who are missing their offices right now, yet is office-working really so great? Consider the relentless risk of disturbance when you are trying to finish that important project, the recirculated air conditioning with its germs, the shortage of quiet meeting rooms and as I have already mentioned before, the drawn-out and expensive commute.

Try breaking the cycle of thinking that being at work - time is productive and not being at work - time is only leisure. The new way of thinking that accepts the concessions of home-working and discards the traditional 20th Century conventions of office working. Yes, the downside is that as humans we are very sociable creatures and we acutely feel the need to be in face to face contact with each other often, meaning lockdown is quite tough for many of us. Yet, if we are able to connect the positive prospects for the future working and the situation that Covid-19 offers us, then together as a society we should be able to find the right balance between working from home and coming together. In the meantime, be considerate of each other and keep safe we are all in this together and we will all overcome this together.

New Electrical Safety Regulations could cost each Huddersfield Landlord £350+ in the next 13 months

Huddersfield Electricians are going to very busy in the next 13 months as they will have to test the electrics of every private rented property in Huddersfield and potentially may have to install new fuse boards and wiring in some circumstances.

New regulations set out in the Housing and Planning Act 2016 gave the Secretary of State of Ministry of Housing, Communities and Local Government the authority to compel private landlords to test their fixed electrical systems.  Currently, these responsibilities only apply to licensable Houses of Multiple Occupancy (where a house is split into individual rooms) yet these new rules will come into force for any new tenancy or renewal of any private rented home from the 1st July this year (2020).

All new tenancies from the 1^st July 2020 will need

to have had their electrics tested

The new IET electrical regulations enforce a duty on all private landlords to ensure that their electrical installation complies with the 18th edition (from 2018) of the IET wiring regulations.  Therefore, any property built before the middle of 2018 will have electrics to 17th edition regulations (or a previous edition).  It might not sound a lot, but the 18th edition regulations were a substantial update over the 17th edition which were published in 2008.  Now, just because a rental property was built with its electrics up to the prevailing 15^th, 16^th or 17^th regulations at the time of building, it doesn’t necessarily mean it will automatically fail this test.

A qualified electrician will need to test your rental property against the new 18th Regulations (as that is standard practice in the industry), which will cost in the region of £150 plus VAT for a small one bed flat through to £250/£350 plus VAT for a large 4 or 5 bed house (again these are ballpark figures).  The Electrician won’t fail a property who complies with a previous regulation (e.g. 16^th or 17^th) unless there is a good reason to do so.  No doubt there will be further clarification notes issued before the implementation date to sort this out – and I will keep you informed in this blog.

Electricians are telling me any property built after 16^th Regulations came into force in 1991 (and they deem it to have failed the test) will probably require a new fuse board and other minor works at an average cost of around £355 per property, although it could be as low as £300 and up to £500 per property to upgrade, meaning…

The potential cost of upgrading every Huddersfield buy to let

Home to 18^th edition regulations (if they all failed) could total £4,605,415

Some Huddersfield landlords might think they can circumnavigate the regulations by renewing the fixed term every 6 months, yet the Government have  protected against that by stating,  irrespective of what tenancy is in place, all rental properties by the 1st April 2021 must have been tested against  the 18^th Regulations standard.

My concern is all 12,973 rental properties in Huddersfield will need

their electrics testing before the Spring of 2021 and that there are only 63 qualified electrician firms within a 2-mile radius of Huddersfield to do all these tests and work

Huddersfield landlords must give any new Huddersfield tenant a copy of the inspection report before they start the tenancy.  Also, Huddersfield landlords must give a copy of the report to any prospective tenant who asks for it in writing within 28 days of a request during the tenancy itself.  

Even with the coronavirus situation, only last week the Government indicated that Landlords should still make every effort to follow these new electrical safety regulations from the 1st of July, yet those same regulations also allow for situations where a landlord cannot carry out their obligations. To stay the right side of the law, they must demonstrate they have taken all reasonable steps to comply with the law. If they do that, they will not in breach of the new regulations (including the duty to comply with a remedial notice). My advice would be if a landlord could keep copies of all communications they have had with their tenants and with electricians as they tried to arrange the work, including any replies they have had, together with any other evidence they have on the electrics of their rental property.

The local authorities are tasked with policing this – and they too have the right to request to see copies of any Electrical Report and works done.  They can force a landlord to comply with the legislation and also may issue a civil penalty up to a maximum of £30,000.

Remarkably, if the letting/managing agent doesn’t organise the Electrical reports, there is nothing in the legislation which allows a landlord to pass the blame onto their letting/managing agent.  That means Huddersfield landlords could be at significant risk from dishonest or badly organised letting agents who won’t/don’t sort the electrics out, so my advice to all Huddersfield landlords is to speak to your letting/managing agent right now and plan ahead.  Rest assured, we have had plans well in hand for our Huddersfield landlords since last year, because I knew this legislation was on its way.

The regulations are obviously important for the safety of tenants and, in essence, these new laws and regulations will mean new accountabilities for the private rented landlords with not much time in which to get prepared and be compliant.  If you are worried about these new rules or don’t have ultimate confidence in your current agent, then please do pick up the phone and let’s have an informal chat about how we can help you with this issue, you don’t want to fall the wrong side of the law do you?

What Will Be the Effect of Covid-19 on the Huddersfield Property Market?

So now we are only a matter of a couple of weeks into lockdown, yet can you believe it I am still speaking with agents from all over the UK, and I do not jest, properties are still being sold and let even in these unprecedented times. Yet I would like to address the question I have been asked many times recently “What will be the effect of Covid-19 on the Huddersfield property market in the short, medium and long term?”

These are obviously unchartered times, yet we can look back in history to give us clues and more recently, the bounce back that is happening in China (and their property market). The Covid-19 situation will touch all parts of the Huddersfield and UK property market, and so in this article, I will be considering its impact on Huddersfield property prices, transaction numbers (i.e. the number of people that move home), Huddersfield buy to let landlords and finally tenants and the rents they pay.

The Three Issues with the Virus and the Property Market

The first issue has to be the lockdown itself. Limitations on society’s capability to go about their normal working life will hinder the house buying/selling process. The practical difficulties of moving home and expediting the property sale; from the viewing itself, the Energy Performance Certificate being carried out, the surveyor checking the property for the lender etc., are all issues. Yet the estate agency and legal industries are coming up with some innovative solutions, from virtual viewings to legally watertight delayed completions, where the old owners stay in the house under licence during the lockdown, and the move will take place after the lockdown period.

Secondly, the UK housing market has never liked ambiguity or uncertainty and this virus will play a part on people’s feelings and sentiment towards moving home (or not).

Thirdly and finally, there is the issue with the money people have, be that wages, whether they have a job (or not) and their overall affluence, on the back of the 29.4% stock market decrease in the last two months (correct at the time of writing this article).

                       

The Background Economics

The economy drives everything including the housing market – and the overall measure of the economy is the Gross Domestic Product figure or the GDP (the GDP is basically the total value of all the goods and services created by the whole UK economy in one year and it currently stands at £2.15 trillion).

Looking at what has happened in China, most economists believe the UK will experience a short, yet sharp economic shrinkage in Q2 2020 with GDP set drop by 4% to 7% in the one quarter depending on the extent of the lockdown. Then GDP is expected to level out in Q3 2020, and then a significant ricochet (how significant depends who you listen to) in Q4 2020/Q1 2021.

Now putting politics aside, I have been impressed with Boris Johnson’s response with wide-ranging support for the UK economy and businesses, and whilst it’s far from perfect, help has been in the guise of the Bank of England reactivating its Contingent Term Repo Facility increasing liquidity and keeping the money markets going (important as that was what the issue was with the Credit Crunch), business grants and Government backed loans, together with telling lenders to take a compassionate line to those unable to make mortgage holidays and finally the furloughing of staff, thus allowing a quicker recovery in the economy.

What Will Happen to Huddersfield Property Values?

There are a few doom-monger economists predicting Armageddon, yet I feel a lot of that is to get column inches in the newspapers. The Huddersfield property market is less exposed than it was in the previous four historical property crashes in 1972, 1979, 1988 and 2008. This is because of the following reasons..

1.      Before each of the four crashes, there had been a significant upward spike in property values prior to the crash. We have not experienced that over the last 12 months.

2.      Mortgage interest as a percentage of household income (nationally) was a massive 32% in 1988, 18% in 2008 – yet now it stands at just under 8% (because interest rates are so low).

This is all assuming we don’t have high unemployment. Yet historically, it has been proved house price falls are not caused by high unemployment. It is in fact, that it happens the other way round, that a housing downturn can (not always) create unemployment - yet with the Government furloughing people – this shouldn’t be such so much of an issue.

The value of an average Huddersfield home currently stands at £187,400

As I will explain in the next section, the biggest effect will be on transaction numbers, not on property values. I suspect in the summer there will be some Huddersfield homeowners who will want to sell at all costs, and not care what price they achieve. Savvy property buyers will swoop on those properties and drive a hard bargain, meaning there will be some short-term localised reductions in what properties sell in the summer for those that want to sell at any cost.

Yet, these reductions will artificially amplify the property value indexes in a downward direction in the autumn (the ones the newspapers mention when they talk about property value changes) because they will be based on the very low levels of property transactions that will take place in the summer (because there is always a lag). Interestingly we have seen this many times over the years because just about every spring for the last 20 years, we have often seen negative or very subdued figures in the House Price Indexes in the months of January/February. This is because of the lack of property sales on the run up to Christmas a few months before. To give this all some context, property values in Huddersfield are 26.7% higher than 10 years ago – and nobody was complaining about those. To give you an idea what that is in pound notes …

The average Huddersfield home has risen in value by £39,500 in the last 10 years

The swiftness of recovery in the autumn/winter from that point will depend on the state of the wider economy. With the measures (mentioned above) implemented by the Government, household incomes should continue to remain steady, and whilst holidays and luxuries may be shelved for a year, those Huddersfield people who have been locked up in their Huddersfield homes for weeks on end, might just consider making that move later in 2020, taking advantage of the ultra-low interest rates. This in turn ought to encourage a return to sturdier levels of house-price growth in the medium term (2021/2 onwards).

The Number of People Moving Home in Huddersfield Will Significantly Drop in 2020

I foresee the number of people moving home (i.e. the number of household transactions) in Huddersfield will significantly drop in 2020. This will only really affect the pockets of Estate Agents (as they charge their fee when people move – so if less people are moving, they will earn less) and the people associated with house moving.

Even with virtual viewings and creative legal work, the number of property transactions will be considerably obstructed over the next couple of months. Interestingly, in the Chinese cities that removed the lockdown first (in the middle of March) I have read in the press the number of property transactions has already bounced back to around half of the medium-term average after only three weeks!

This was caused by people delaying their move because of the ‘B’ word (Brexit) over the last 12/18 months, which interestingly saw a massive upsurge with the Boris Bounce in December/January and February.

Worse case scenarios suggested by economists state transactions will drop to 20% of the normal 10 year average number of transactions until the end of Q3 2020, return to 65% by Q1 2021, increase to 100% by the end of Q2 2021 and then 120% in 2022, yet most sensible economists (and often those that stay out of the limelight and don’t go chasing headlines), believe transactions will reduce to 45% to 50% of the 10 year average until the end of Q3 2020, improve to 80% in Q4 2020 and 100% by Q2 2021 with potential for higher transactions numbers in the order of 110% to 130% in 2022.

It all sounds rather grim doesn’t it, until you dig deeper…

Remarkably, it must be stated the number of property transactions over the last 12 months in Huddersfield are only at 77.4% of the 10-year Huddersfield average … and this was before Covid-19

In the last 12 months, there have been 1,869 property transactions in Huddersfield, compared to a 10-year average of 2,416 per year

Yet, let’s not forget, these predictions are from the 10-year long term average, and as it can quite clearly be seen, transaction levels are already at a low, even without Covid-19 and nobody was complaining about that apart from estate agents and removal vans!

With the number of Huddersfield people moving being held back, I would anticipate seeing a build-up of supressed demand for Huddersfield property from Covid-19, on top of the pent-up demand from Brexit, especially with many Huddersfield families realising their Huddersfield homes aren’t large enough to contain them as the lockdown experience will push many Huddersfield households to move in late 2020 or possibly 2021 …and as every economics student knows, when demand outstrips supply (because we can’t all of a sudden build more houses), prices go up.

How Will This Affect Huddersfield First Time Buyers, Those Trading up, Downsizers and Landlords & Tenants?

FIRST TIME BUYERS - I believe the banks will be a little more wary when lending money to first buyers with their need for large percentage mortgages. The demand for the Help-to-Buy Scheme has been increasing year-on-year, yet its pace of growth has been declining in the last couple years – I foresee demand accelerating in the later parts of 2020. There could be some good deals to be had from new homes builders looking to release cash in Q3 and Q4 later in the year? Maybe the Bank of Mum and Dad might be able to help, yet they too will be stretched, although they might be able to release equity down the generations to their children and grandchildren (see the downsizers section).

TRADING UP – Many Huddersfield homeowners in their starter homes will be going stir-crazy in their smaller homes, and with interest rates at ultralow levels, some Huddersfield homeowners might forgo holidays and entertaining, and consider putting their weight and finances into moving up market in Huddersfield. That might also be easier, if the Huddersfield downsizers start to move as well.

DOWNSIZERS – There are many Huddersfield retired people, rattling around their large Huddersfield home, with their children having flown the nest and possibly moved away years ago. These Huddersfield people don’t need to move, and so are considered ‘optional home-movers’ – yet the Covid-19 crisis could be the catalyst to make them finally move to be nearer their family around the UK – releasing good sized Huddersfield family homes onto the property market for the ‘Trading Uppers’ to buy.

LANDLORDS & TENANTS – I suspect there won’t be many Huddersfield tenants moving in the next three to four months. Tenants have the peace of mind with a cessation on evictions until the summer and buy-to-let mortgage payment holidays for buy-to-let landlords whose tenants are in financial difficulty (note the tenants have to give proof to their landlord that they are unable to pay with their applications to Universal Credit etc., etc.,). There might be small reductions in average rents, as some Huddersfield landlords undertake to help their tenants in these chastened financial times, yet for most people, rents will continue to be paid, making no major impression on rental prices in 2020.

Let’s not forget, the level of average rents is directly related to tenants wages and I can’t see why this relationship between rents and tenants wages should break after Covid-19, so as wages are held back in the latter parts of 2020 the growth rents over the next year will be subdued. Finally, those Huddersfield buy-to-let landlords sitting on cash might be able to bag a bargain in the summer from a desperate seller, before normality returns in Q3 and Q4 2020.

Conclusion

We are in unchartered territory, yet for the reasons explained in this article and, assuming there are no other seismic shocks in the coming weeks and months – in a few years’ time – this will be seen as a bump (albeit a rather big bump)  - another part of the roller coaster ride of the UK and Huddersfield property market.

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