Why Savvy Huddersfield Buy-to-Let Landlords Don’t Use 10-Year Mortgages.... And the reason you shouldn’t either

I know of many Huddersfield buy-to-let landlords who fell into property investing by accident. Many didn’t want to sell their family home when the Huddersfield housing market crashed in the Credit Crunch of 2009/10, yet still needed to move (often for work). They thought they would keep their Huddersfield family home in case they ever moved back to Huddersfield. Yet by keeping it, it couldn’t remain empty (there was still a mortgage to pay on it), so they ended up renting their home out.

 

And that was the start of many Huddersfield buy-to-let landlord's journeys!

 

Many of you Huddersfield landlords reading this have had your fair share of problems, from tenants doing a midnight flit, rent arrears and troublesome tenants, yet also had your rewards.

The average Huddersfield landlord in the last ten years has

seen their investment rise by an average of £65,500

and has earned in rent (before costs) £83,104.

 

Many of you reading this have started to learn about investing and creating a property portfolio by buying additional Huddersfield homes to rent. The average Huddersfield buy-to-let landlord now owns 3.38 properties that generate an impressive passive monthly income with the bonus of growing their household net-worth through growth in the value of their buy-to-let portfolio.

 

With the average Huddersfield buy-to-let landlord in the 56-to-58-year age range, one thing I learned about savvy buy-to-let investing, the shrewd Huddersfield landlords tend to want longer-term mortgages.

 

Taking longer-term mortgages reduces the risk to the landlord.

 

It sounds counterintuitive, yet it comes down to leverage. Let me explain that whilst leverage is formidable in buy-to-let, it is also quite risky.

 

Before I explain why some readers might not know what leverage is and how it relates to mortgages and buy-to-let, two-thirds of landlords are debt-free, yet those landlords who have come into the property investment game in the last 10 or 20 years have had to use borrowed money (mortgages) to finance their deals. Therefore, by putting down a small amount of say 20% and borrowing the other 80%, if you calculated your return on an investment base only the money that you put into the deal, then that is what is called leverage (i.e. using borrowed money as a funding source when investing in property and generate greater returns on borrowed money).

 

You would think, as, say a typical 55-year-old Huddersfield landlord, you would want to be only taking a mortgage out for however long you intend to work (say ten years at most) – meaning your portfolio would be all bought and paid for by the time you retire. Yet the clever buy-to-let Huddersfield landlords I talk to don’t see their portfolio as having to be paid off (and mortgage-free) by the time they retire. They have understood how to utilise and administer their mortgage debt rationally to enhance their returns without taking on unwarranted risk.

 

By taking a short-term mortgage of say ten years, compared to a 25-year mortgage, during those ten years, your monthly mortgage payments will be particularly high (because the longer the mortgage term, the smaller the monthly payments will be).

 

Also, you can pay off a 25-year mortgage in 10 years, but you cannot pay off a 10-year mortgage in 25 years.

 

Longer mortgage terms mean lower monthly mortgage payments, which in turn means greater cash flow and more elasticity within your rental portfolio. Now to some Huddersfield landlords, possessing their rental properties debt-free is very important. Yet, I would still seriously consider taking the 25-year buy-to-let mortgage and make additional payments every month to help you to pay the mortgage off early.

 

Therefore, as an example, if you have a bad couple of months without any rent coming in or unexpected bills, you can return to making the mandatory lower monthly mortgage payments without getting your property repossessed.

 

So, by taking on the longer-term mortgage, you decrease your risk because it has the lower required payments.

 

Let me give you an example - if our Huddersfield landlord wanted to buy a Huddersfield terraced house property for say £135,200 and put down a 25% deposit of £33,800, the best buy-to-let deal I found online on the day of writing this article was a 1.79% Santander 5-year fixed-rate buy-to-let mortgage.

 

Looking at the mortgage payments per month when comparing the mortgage terms; on the 10-year mortgage, the mortgage payment would be £931.65 per month. Therefore, our landlord would have to top up from personal savings to make up the monthly mortgage payments. Whilst if they choose the 25-year mortgage, the mortgage payment would be £428.31 per month. This would mean our landlord would be in profit from day one.

 

Some might say though the longer term means more interest payments, as it's 25 years and not 10 years. Yet, at today's low interest rates, that would only mean an additional £16,694 in interest payments spread over 15 years – not much in the grand scheme of things.

 

 

	10-year Mortgage	25-year Mortgage
25% Deposit Required	£33,800	£33,800
75% Mortgage Borrowed	£101,400	£101,400
Annual Interest Rate	1.97%	1.97%
Mortgage Length (in years)	10	25
Mortgage Payment per Month	£931.65	£428.31
Sum of Mortgage Payments	£111,799	£128,493
Interest Cost	£10,399	£27,093

 

 

Therefore, by taking the longer-term mortgage, as a savvy Huddersfield landlord, you are 'cash flow positive’, meaning you can build a reserve fund for every one of your rental properties to enable you to deal with any unforeseen voids and repairs.

 

The best way to deal with a buy-to-let property is to see it as a small mini-business, and as with all businesses, you need to grow your income and reduce your expenses whilst in the background provide a decent rate of return for your investment.

 

The greater the amount of mortgage debt you carry, the greater your monthly mortgage payments, and the simple fact is, the shorter the mortgage term, the higher the monthly mortgage payments. So, if you take on a sensible level of mortgage debt and be ‘cash flow positive’, you can profit from much better returns without taking on excessive risk.

 

These are my thoughts - please share yours.

 

P.S. Before I go, I have to say this to cover my proverbial. My comments are only a very brief commentary on the issues raised and should not be relied on as financial advice and that no liability is accepted for such reliance, and that anyone needing such advice should consult a qualified financial adviser or other authorised person.

 

Huddersfield Homeowners Profit By £35,320 in Last 5 Years… yet Bitcoin investors would have made £8,163,180 in profit. Is investing in ‘Bricks & Mortar’ dead?

Investing in property has historically been a sound investment, yet alternative investments (like Cryptocurrency) have been gaining traction over the last five years. So, should we all ditch buying our own home and buy Bitcoin?

 

Cryptocurrency with such names as Bitcoin and Ethereum are being bandied about as the new investment vehicle everyone should be investing in. But is Crypto a sound investment or just an ‘end of the seaside pier one arm bandit’ speculation?

 

Well to start, I need to discuss the difference between investing and speculation.

 

I have always seen investing as making a thorough detailed evaluation (and you are realistically sure your principal lump sum is relatively safe), you then have an opportunity to make a profit. Whilst speculating is all about putting your money into an asset that has ambiguous protection of your principal lump sum … and you have an opportunity to make a large profit but also the potential to make a huge loss.

 

In a nutshell, investment should be as interesting as watching paint dry and speculating should be as exciting as putting all your money on red on the roulette wheel.

 

So, let’s see what has happened to both Cryptocurrency and Huddersfield property in the last five years.

 

The average Huddersfield home five years ago was worth £163,920, today it’s worth £199,240.

 

We now ask, what would have been the return if you had invested the same amount in Bitcoin?

 

If you had invested £163,920 into Bitcoin in 2016,

it would be worth £8,327,100 today.

 

What about the return if you had invested the same amount in Ethereum?

 

If you had invested £163,920 into Ethereum in 2016,

it would be worth £27,068,100 today.

 

Yet only In June, when China placed stringent controls on how its population can use Cryptocurrency, Bitcoin dropped in value by 30% in one day. Also, this year, we saw another fall in Bitcoin when Elon Musk tweeted that Tesla were banning the acceptance of Bitcoins to buy its cars.

 

Can you imagine the value of your Huddersfield home dropping in value by £60,768 in just one day because of one tweet?

 

So, if Cryptocurrency is speculation and extremely high risk, surely buying your Huddersfield home is an excellent investment?

 

It is my opinion that purchasing a home to live in is a massive financial choice that can give you peace of mind and a lovely place to live, yet it is not an investment. I know this is going to sound strange coming from someone in the Huddersfield property industry, but whilst I know it’s common for people to think of their Huddersfield home as an investment, I believe nothing could be further from the truth.

 

I am not suggesting every 20 and 30 something should avoid homeownership, but if you are edging towards buying a Huddersfield home because you think you are making a savvy investing choice, think again.

 

The concept that the home you live in can be an investment comes from the statistic that, historically, property values increase. We all know someone, our Mum and Dad or Grandparents for example, who purchased their Huddersfield home in the 1950’s or 1970’s for the price of an Xbox and it’s now worth more than you make in ten years in salary.

 

Yet, I believe, it’s not an investment only because it goes up in value.

 

Between 1989 and today, Huddersfield property values, after removing inflation, have gone up by 50.37% … sounds great until you realise that is only 1.57% growth per annum (after inflation).

 

Sounds rubbish, doesn’t it?

 

But guess what? Does it really matter?

 

Even though your Huddersfield home’s value has outperformed inflation, there are other reasons your Huddersfield home is not an investment.

 

A real investment needs more than the outlook of an increase in value.

 

A home has a more important primary purpose.

 

Possibly the specific biggest reason why your Huddersfield home is not an investment is because its prime purpose is providing a roof over the heads of you and your family. One of the most rudimentary issues that makes an investment an investment is your capability to decide the timing of your possession of the investment.

 

A true investment requires you to buy it and sell it at times (and under situations) that are probable to exploit your investment return, yet since your Huddersfield home is your family’s shelter, you will have hardly any power over the sale and purchase of your Huddersfield home from an investment perspective.

 

The absence of ‘real’ control over the timing of buying and selling our Huddersfield homes (and note I use the word home and not house) has had a significant harmful effect on property as an investment.

 

In all my years in the property profession, I have seen numerous Huddersfield people buy houses at the top of the market (1988 and 2008) because that was the time that they required a home for their family, but those same people became stuck when having to sell their homes a few years later because of personal circumstances, albeit for a loss.

 

Then I have seen other Huddersfield people buy at the bottom of the market (1993 and 2011) because that was the time that they also required a home for their family, and those same people had to sell their homes a few years later due to personal circumstances, albeit for a huge profit. Are the second set of people more savvy investors? No, it was just good or bad timing, and that is not uncommon when it comes to buying homes, and so has to, in my opinion, exclude a home as an investment.

 

A Huddersfield home cannot be an investment

if you never plan to sell it … and not buy another home.

 

While it is fact that Huddersfield homes usually increase in value, there is only a partial opportunity to tap into that growth. The best way to sell your Huddersfield home is after it has experienced a massive amount of value increase, sell at the top of the market, move into rented accommodation, then buy at the bottom of the market. Nevertheless, how do you know when it is the top and bottom of the property market (and moving home is considered the third most stressful thing you can do after death and divorce).

 

That doesn’t sound like an investment to me, does it to you?

 

Ok, most people sell and buy another home, so when you do sell your Huddersfield home, you will have to use the profit you have made from the sale of your original Huddersfield home to purchase the next home as you will be moving from one home to another. This means your profit (equity) is trapped profit.

 

The only time that doesn’t happen is when you either trade down to a less expensive home, or move into rented accommodation, yet both scenarios are quite rare occurrences.

 

Using your Huddersfield home as a bank account?

 

In the early 2000’s, many banks and building societies were encouraging homeowners to re-mortgage their homes as property values rose by 15%+ a year. By extending the term of the mortgage, you could easily borrow £20k, £30k+ for fancy holidays and new cars and the monthly mortgage payments would be lower – that was like free cash!

 

Known as equity-stripping, a lot of Huddersfield homeowners found out the hard way during the Credit Crunch that they had in fact bought themselves negative equity when property values crashed. That left them powerless to re-mortgage to lower the monthly payments when the interest rates dropped in 2009, yet unable to sell to move to a less expensive property because of the negative equity. Finally, to add insult to injury, as the mortgage term had constantly been pushed into the future, they had the prospect of having to pay their mortgages until their late 60’s/early 70’s.

 

Bitcoin doesn’t need a boiler replacing every ten years.

 

Every homeowner knows it costs money to maintain their home. Replacement windows, soffits, roof, carpets, kitchens, bathrooms, boilers, flat roofs – the list goes on. Over the 25 years of a mortgage, that can add up to many tens of thousands of pounds, yet one can justify those costs since your home is providing you shelter. But that gets back to the original principle - a home is a shelter, and not really an investment.

 

But isn’t renting out a property an investment?

 

The solid fact is that your Huddersfield home, the home that you live in, basically won’t provide any form of cashflow when you are a homeowner, unless you move out and rent the whole house to someone else. That is called a buy-to-let investment – of course that is an investment and I know many Huddersfield buy-to-let landlords who make a decent living at renting out their rental properties.

 

Yet, that wasn’t the point of the question I asked originally – “is buying a home, for you and your family to live in, a good investment?”

 

Of course, you could take in a lodger or rent rooms out as an Airbnb, and this will help you pay your mortgage, Council Tax and other costs associated with homeownership, so it can be worth it for many. However, an “Englishman’s home is his castle” is quite apt and most of us aren’t good with sharing it with strangers.

 

What do we buy homes for then?

 

To conclude, I believe the principal reason why so many Huddersfield people consider their home (not house) to be an investment is because we are all obsessed about how much our home is worth.

 

We are all guilty of checking out Rightmove when a property on our street comes up for sale. Yes, we are nosey by looking at the pictures, yet the most important thing is what price they’re asking and how it compares to our home. Our home is our biggest tax-free asset and especially when it goes up in value, which it certainly has done for the last nine or ten years, it certainly can feel like an investment then.

 

However, during the five property crashes that we’ve had since World War II, not only did property values not increase, but they fell. Some dropped dramatically. For homeowners in that position, not only was their home not an investment, but it had become a huge liability.

 

Thank you for taking the time and trouble in reading this article. I must stress that I’m talking about our own homes as an investment and not buy-to-let investment which is a completely different animal and certainly is an investment, if done correctly.

 

One final thought - for those of you buying and selling Cryptocurrency – enjoy your roller coaster. For me, the thing about property is this; you can touch it, you can feel it, there is something reassuring about a 9-inch red brick and tiled roof. It’s home, it’s where you bring up your family, it’s where memories are made and the best investment you can make in life is with them, your family … and for that – it is a priceless and enduring investment.

 

These are my thoughts, please tell me what yours are.

Huddersfield Buy-to-Let Landlords Owed £2,084,333 in Unpaid Rent. Rogues or Saviours?

There is no getting away from the fact that the rise in the number of buy-to-let properties in Huddersfield has been nothing short of astonishing over the last twenty years. As a result, many in the press have said Britain is a broken nation, with many twenty and thirty-somethings unable to buy their first home. The press has named this group ‘Generation Rent.’

 

Huddersfield landlords have been accused of scooping up all the smaller Huddersfield properties for their buy-to-let property empires. Others blamed the Government (of both persuasions) for pouring petrol on the buy-to-let fire for giving landlords an unfair advantage with the way buy-to-let has been taxed in the past. Many have said these landlords have priced out Huddersfield's 'Generation Rent'. Many say they are rogues, and you can see why there is little sympathy for landlords, especially as…

 

Huddersfield landlords receive £113,176,452 a year in rent – easy money or what?

 

So, as we come out of lockdown, I want to make a stand for Huddersfield landlords and talk about the great work they have been doing during the pandemic.

 

Since lockdown, it has been (almost) illegal to evict a tenant from private rented property. Yet, in the last few weeks, this ‘ban on evictions’ has begun to be eased, making some commentators forecast a ‘tsunami of homelessness’ as landlords ready themselves to kick out the tenants who cannot pay their rent.

 

You might say they can afford it, yet I need to highlight an often-untold story in the massive numbers of Huddersfield landlords who have co-operated with their Huddersfield tenants to evade eviction.

 

The personal finances of some Huddersfield landlords and tenants have been ruthlessly strained during the last 16 months — something that is going to have ramifications on the back pockets of both landlords and tenants, as well as the attraction of being a buy-to-let landlord (more of that later).

 

1,168 Huddersfield tenants are in arrears with their rent

to the tune of £2,084,333.

 

That's money these landlords need to pay their mortgages with and even to live off themselves.

 

The eviction ban was imposed in March 2020 and the Government has expected private landlords to stand the cost of their tenant’s rent if they could no longer pay. It was estimated over 1 in 5 landlords with mortgages had requested a mortgage payment holiday in 2020. Thankfully, that now stands at 1 in 100 as most Huddersfield landlords with shortfalls in rent have been using their own personal savings to cover the mortgage payments.

 

I have seen so many landlords giving their Huddersfield tenants rent breaks and discounts to help them through these times. However, most landlords I talk to acknowledge that it is better to have a tenant paying something rather than a tenant paying nothing, hoping that total rent will start flowing as the economy recovers.

 

Going into the pandemic, 1 in 25 Huddersfield tenants were in arrears, yet that now stands at 1 in 11.

 

So, are we going to see lots of evictions? I would go as far as to rebuff the idea that we will see a rush to the courts of landlords to obtain possession orders now the eviction ban has been lifted. I have always viewed evictions as a last resort.  

 

Before the pandemic, it took about 12 months for courts to hear rental repossession cases, so this backlog will be nearer two years (if not more). Nonetheless, the threat of a County Court Judgement (CCJ) often makes tenants pay up as it will demolish their credit rating, making it very challenging for them to rent another home.

 

I feel for those Huddersfield tenants under furlough or reduced hours as they have the quandary of wanting to reduce their outgoings by moving to a cheaper rental property, yet whose rental deposits will be sacrificed to cover their rent arrears. However, some have said that because house prices have exploded during the last 16 months, Huddersfield landlords should write off their tenants’ arrears as a goodwill gesture.

 

The issue is, 2,080 Huddersfield landlords only have a single property for rent, so the arrears would have to be funded by their personal savings.

 

For them, the pandemic experience could be the incentive to sell up for good.

 

A National Residential Landlords Association survey found around a third of all landlords were now more likely to sell their buy-to-let properties altogether or sell some of them. This would mean fewer properties for tenants to rent, thus driving up the rent.

 

According to government and industry data, evidence suggests that a tenant who rents a property directly through a landlord and not through a letting agent is between two and three times more likely to go into arrears of 2 months or more. Is this because tenants know that private landlords who advertise directly for tenants on Gumtree and other platforms don't carry out the checks letting agents do on them?

 

Many of those landlords are switching the management of their property to an agent, and for those landlords sticking with self-management of their property, there is circumstantial evidence they are starting to become a lot pickier when starting new tenancies. Even though illegal, spurning tenants on benefits is woefully all too common. I also worry there could be a stigma about renting properties to self-employed people because of the erratic nature of their income.

 

Looking into the future, I envisage a growth in the use of ‘rent guarantor contracts’, whereby the tenant is called upon to provide a 3rd party person to pay the rent if the tenant doesn’t. These are pretty common for student lets and those on certain benefits, and it wouldn't surprise me if these are used more often for self-employed tenants and regular professional lets.

 

That is why I believe Huddersfield landlords should be celebrated ... most of them have been saviours. These are my thoughts - what are yours?

 

How Eco-friendly are Brighouse Homes? And how new Gov’t rules will mean draughty low-eco Brighouse homes will drop in value

"It’s Not Easy Being Green", was the song that Kermit sang on Sesame Street.

 

Yet now being green is a normal way of life for most of us. Walking or cycling places instead of taking the car, recycling and even shunning meat are some of the things most Brighouse households are trying to do their ‘bit’ for going green.

 

Our conduct may have improved but when it comes to our Brighouse homes, there is still a long way to go. It is estimated around a fifth of carbon emissions come from home energy usage (nearly three quarters from heating and lighting). The country is releasing 37% less carbon into the atmosphere than in 1990, yet we have legally binding targets to hit 100% by 2050 — and the Committee on Climate Change has stated the UK will need to eradicate greenhouse gas emissions from homes to meet that target.

 

Landlords were hit first because since April 2018, the Minimum Energy Efficiency Standards (MEES) regulations with regards to eco-friendliness of the rental properties have required all rental properties to have a minimum Energy Performance Certificate (EPC) rating of ‘E’ or above otherwise it is illegal to let out a property, bar a couple of exceptions. This has meant Brighouse landlords have had to spend many thousands of pounds to improve their rental property’s EPC rating (an EPC rating of ‘A’ being the best eco rating through to a ‘G’ for the worst – just like washing machine or fridge ratings).

 

But new Government plans could hit Brighouse homeowners

in the pocket as well.

 

The Government is planning to force banks and building societies to penalise people wanting a mortgage of draughty low-eco homes with an energy performance certificate (EPC) rating of D or lower. For those properties not hitting the correct level of EPC rating, it is suggested some form of levy will be placed on the mortgage provider, who in turn will pass that on to the home buyers in the form of higher mortgage payments. Some are describing this charge as an ‘eco-mortgage levy’.

 

Just over 7 in 10 (71.8%) homes in Calderdale would be hit by this ‘eco-mortgage levy’, thus potentially reducing the value of those homes

 

Interesting when you compare this with the national average of 60.6%.

 

In real numbers, 56,111 homeowners and landlords in our local authority area would either struggle to get a mortgage from a bank or building society or it would cost them more because they were a ‘D’ rating on their EPC or below.

 

 

Looking at the stats broken down for Calderdale

 

·         47 properties are classified as A on the EPC register

·         4,212 properties are classified as B on the EPC register

·         17,751 properties are classified as C on the EPC register

·         30,881 properties are classified as D on the EPC register

·         19,246 properties are classified as E on the EPC register

·         4,226 properties are classified as F on the EPC register

·         1,758 properties are classified as G on the EPC register

 

 

So, what can Brighouse homeowners and landlords do to

improve their EPC rating?

 

Well surprisingly, it need not cost a lot to improve the EPC rating of your Brighouse home. One of the most inexpensive ways to help improve your Brighouse home’s energy efficiency is low energy light bulbs with an estimated cost of just under £40 per UK property. Other efficiencies can be gained by insulating your hot water cylinder, draught proofing any single glazed windows, increasing your loft insulation, and upgrading your central heating controls, all of which can be done for a total of around £750 to £850 per property.

If you want to know the EPC rating of your home, either google the phrase ‘EPC register’ or send me a message and I will find out for you.

 

Finally, as Kermit famously also said, “Life's like a movie. Write your own ending”. If you are a Brighouse homeowner or Brighouse landlord, why not look at your property’s EPC rating and look at the recommendations. You are going to have to spend the money sometime, so why not do it now and enjoy lower energy bills and when you come to sell, you won’t be penalised .. a win-win situation for you and the planet?

Your Great-Great Huddersfield Grandfather Would Have Only Paid £235 19s 5d for his Huddersfield Home in 1871

 

Would it surprise you even more when I said the ratio of house prices to wages are still lower today when compared to 1871?  Yes you read that correctly, as a proportion of average wages British house prices are 17.6% proportionally cheaper today than they were in 1871.

 

I wish to talk about the last 150 years of the British property market and later in the article, the Huddersfield property market. I will also touch on why, before the 1900s, buying a home in Huddersfield was considerably more expensive than today and why that changed.

 

So, let’s look at some interesting stats to get us started :

 

·         In 1871, each house was occupied by an average of 5.33 people (i.e. for every 100 houses, 533 people lived in them), whilst today that stands at 2.39 people per house

·         In 1871, there were 4.5 million properties in the UK, whilst today that stands at 27.9 million

·         In 1871, the weekly average wage was 13s 8½d (68p) whilst today it is £585.50

·         In 1871, only 20% of people owned their own home, whilst today its stands at 65%

 

I stated in the first part of the article it was more expensive to buy in the latter parts of the 19th Century than today. It may only be of historical interest, but back in 1871, the ratio of average house prices to average wages was 10.5 to 1 (i.e. the average house was worth ten and half times the average person’s wage), whilst today it stands at 8.8 to 1.

 

Interestingly, for the next 45 years, that ratio went on a downward trend relative to wages and only stopped falling after WW1, where the average house was worth only 2.2 times the average wage. This made houses more affordable and set the foundations for the homeowning passion we Brits have today.

 

So why did this happen, what can we learn from it and what does it mean for Huddersfield homeowners and Huddersfield landlords?

 

There are three significant drivers that made property a lot more affordable between 1871 and 1911: the Victorians built more property, made them smaller and people's wages rose significantly.

 

·         In the 40 years between 1871 and 1911, the number of properties in the UK rose from 4.5 million to 8.9 million. To give you some perspective, there were 18 million properties in the UK in 1981. If the UK had grown by the same rate between 1981 and today that was experienced between 1871 and 1911, there would be 35.6 million households in the UK (and not the 27.9 million mentioned above).

 

·         In 1871, the average plot size of a property was 0.23 acres, yet by 1911, that was down to 0.06 acres (or a plot of 72ft by 40ft). This came about from building smaller types of property (i.e. a change away from larger Georgian detached houses towards the infamous rows of Victorian terraces), and a downshift in the average size of houses within each category.

 

·         The average value of property dropped by 26% between 1871 and 1911, whilst wages rose by 85% over the same time frame.

 

So, by 1911, the average Huddersfield property had dropped in value from £236 in 1871 to £175.

N.B. – you might have noticed I wrote £236 in a slightly different way in the title of the article. Up to 1971, a pound was split not into 100 pence but 240 pence. There were 12 pence in a shilling and 20 shillings (or 240 pence) in a pound. It was expressed in the form £sd and spoken as "pounds, shillings and pence". I dropped that into the title as it’s the 50^th anniversary this year of when the UK decimalised its currency (younger readers – do google the story – it’s a fascinating topic).

 

So back to the property market and at the end of WW1, four in five people still rented, virtually all from private landlords. Politicians were concerned about the poor living standards of people’s homes, and this led to the ‘homes fit for heroes’ 1919 Housing Act which delivered subsidies for local councils to build council houses. The average value of a Huddersfield property in 1922 was £275.

 

The 1930s - By 1930, the average value of a Huddersfield property stood at £348. With the country building a third of a million houses per annum, interest rates fixed at 2% and hardly any planning regulations, supply of property was outstripping demand, so the average Huddersfield home dropped ever so slightly in value to £322 by 1938.

 

The 1940s - With the bombing of many towns and cities and housebuilding being stopped because of the war, this created a perfect storm to increase house prices after the war. By 1947, the average Huddersfield home had risen in value to £1,076 because just as food was rationed during and after the war, so were building materials. Builders could spend no more than £350 on building materials for a new home (and that lasted until 1954).

 

The 1950s - The '50s were all about building council houses – a quarter of a million of them each year. By 1959, the average Huddersfield home had risen steadily to £1,492.

 

The 1960s - This decade saw even more houses being built in the UK, with an average of a third of a million houses a year being built. Huddersfield is full of 1960’s council houses and now even more owner-occupied housing, meaning by the end of the decade Britain had as many homeowners as renters. The average Huddersfield house had risen in value to £2,737 by 1969.

 

The 1970s - We experienced the first boom and bust housing bubble in the early 1970s with house prices rising by over 30% a year in the early years of the decade (so the current 10% a year is child's play!) but prices dropped in 1974. They recovered quickly in the following years, not because of increased demand but due to hyperinflation, making the average Huddersfield house price rise to £13,920 by 1980.

 

The 1980s - This was the decade of council tenants being able to buy their own homes, although not many people know it was an idea from Labour. They decided against the idea, but it was seized upon by the Tories, who made it the cornerstone of their 1979 election manifesto. The property market helped improve the economy, and by 1988, Huddersfield property values increased to £29,115 (only to drop by 32% a couple of years later).

 

The 1990s - The housing market crash of the early 1990s was painful for all, exacerbated by mortgage interest rates being raised to 15% on Black Wednesday (16 September 1992) and left there for 12 months. Unemployment went from 1.5m to 3m for the second time in ten years, and many of those homeowners who had taken out large mortgages in the late 1980s housing boom could no longer afford the repayments because of the high interest rates, meaning repossessions went through the roof. The crash also made builders nervous, and they only built 150,000 houses on average a year in this decade. Yet, by the mid-1990s, things started to improve. So much so, the average Huddersfield home was worth £54,580 by the turn of the millennium.

 

The 2000s -  The decade of cheap mortgages and the rise of buy-to-let, together with a severe drop in the number of new homes being built, contributed to the UK’s third big housing bubble since WW2. The average Huddersfield house price more than doubled to £146,160 by 2008, before the Credit Crunch brought the boom to an end, and a year later (2009), the average Huddersfield property had dropped to £129,819.

 

The 2010s – The property market started to come back to life in the early 2010s with property values steadily rising throughout the decade, yet builders were only building around 135,000 new homes a year. It also might surprise you that by 2015/6, the number of homeowners was starting to rise quite significantly, meaning today, as we enter the 2020s decade, the average value of a Huddersfield property now stands at £185,008.

 

So, now we are back to 2021.

 

Yes, your Great-Great-Grandfather might have been able to buy their Huddersfield house for a shade under £236 in 1871. Taking inflation into account since 1871, that same Huddersfield house today would be £28,423.78, yet if his wages had increased by inflation at the same rate, the average wage today would be £81.91 per week, not the current £585.50 per week.

 

I appreciate there are plenty of other factors involved with this topic, such as the cost of renting, raising a deposit, changing lifestyles and the biggest point, the cost of borrowing money on a mortgage.

 

All this begs the question, what does the future hold for the Huddersfield property market?

 

It's obvious since the mid-1980s, house prices have sustained a period of impressive growth (even withstanding a couple of property crashes). The Bank of England has gone on record to say that much of the rise in average house values, comparative to wages, between 1985 and now can be seen because of a sustained, dramatic and consistently unexpected decline in real interest rates and additionally concludes that: ‘An unexpected and persistent increase in the medium-term real interest rates will generate a fall in real house prices.’

 

Cheap mortgages and a lack of building have created this situation. So as long as interest rates don’t go back to their long-term average of the 5% to 7% range or the Government decides to increase building new homes to half a million a year (from the current 240,000 per year) … things will carry on as they are in the medium to long-term.

 

These are my thoughts … I would love to hear any stories of your family buying property in the late 19^th Century or early 20^th Century and what they paid for it, together with the affordability of Huddersfield property and the future of it.