Property Investment in Halifax
We published our first ‘spotlight on Halifax’ article back in 2019, but so much has happened since then that an update seemed well overdue.
In that first article, we made the point that Halifax was a town set for significant capital growth and likely to deliver good, respectable yields. In the months that followed, events proved that prediction to be correct: capital gains averaged around 10% in the 12 months to January 2022, and gross yields in the central HX1 postcode reached 7.2% over the same period.
Of course, past performance is no guarantee of future rewards, but the same features that made this West Yorkshire town so appealing in 2019 are still very much evident today. In this post, we’ll consider those enduring strengths, as well as some of the factors that have changed.
Halifax – an Overview
Halifax is a town in the Metropolitan Borough of Calderdale in West Yorkshire. It’s located around 10km southwest of Bradford, and about 22km west of Leeds. Manchester city centre lies only 36km to the southwest.
This gives the town a good strategic location. As Calderdale Metropolitan Borough Council remarks:
“Within 1 hour’s travel of the borough are a quarter of a million businesses, over 8 million people and a workforce of more than 3 million, with the combined Leeds and Manchester city region economies worth around £150bn on our doorstep.”
Being part is the Leeds City Region is important. This is a powerhouse of a regional economy, committed to massive investment and economic growth. Even if it were to do nothing, Halifax would inevitably benefit from some of this activity – not least in terms of employment and improving infrastructure.
But, of course, local planners in Halifax and the wider borough are doing much more than just sitting on their hands. They have set in motion significant investment programmes of their own, creating space, incentives and opportunity for major employers to come to the town and settle. As we’ll see, this is having a marked effect on local job prospects and economic recovery in general.
For property investors, these changes have some important consequences. First, rising employment is contributing to steady population growth, which is one of the key drivers of rising demand for property. Second, it is helping to grow the average earnings of local residents. This should help to sustain rising rental and capital values – a particularly salient point at a time when living costs are skyrocketing and, in many regions, average incomes are expected to fall.
Demand for Local Property
In Halifax, demand for property is being affected a number of factors. Principally, they include:
· Population growth
· Demographic changes
· Rising employment
· A likely resurgence in tourism
We will consider each of these in the following sections.
Population Growth:
According to the most recent data from Plumplot, the total population of Halifax postcode area was 165,000 in 2020, a figure which had increased by +10.2% (15,300 residents) since 2002.
In its Joint Strategic Needs Assessment, the local authority considers a shorter timespan but its findings are similar: “According to ONS there are 211,400 people in Calderdale (ONS 2020 Mid-year population estimates). This is an increase of approximately 7,500 people since the 2011 Census.”
This in itself is encouraging for investors because any net increase in resident numbers will always tend to add to demand for local property, whether that’s on the part of prospective tenants or homebuyers. That, in turn, helps to buoy up average values and – in the case of rental properties – it also helps to minimise the risk of voids.
However, Calderdale Council is not looking only to rely on natural population growth to keep the town thriving. It is actively seeking to draw in new residents, businesses and investors, all in the name of growing its local economy. Consequently, in its local plan (the housing supply document that it’s obliged by government to produce) the council is planning for a rate of growth that, by 2033, will be up to four times greater than the standard ONS population growth forecast.
Explaining this to a local newspaper, the Leader of the Council, Cllr Tom Swift said:
“We want to see Calderdale grow and thrive over the next 15 years, with enough pupils to keep our schools open, enough customers for our town centre shops and enough employees to work in our local businesses without having to travel in from elsewhere. The Local Plan… is designed to address these issues.”
In short, whether Halifax’s population grows in line with national trends or with it its own lofty economic ambitions, it seems certain that resident numbers and demand for residential property will rise noticeably in the coming years.
Demographic Changes
Returning to Calderdale Council’s Joint Strategic Needs Assessment report, the authority reports only relatively small changes in the make-up of most age groups, but indicates much faster growth in the older groups. It writes:
“There were large increases in the proportion and the numbers of residents aged 45 to 54, and 55 to 64. This may have implications for the residents aged 65 and over within the next ten years. The group aged 65 to 74 has already seen a 28% increase since 2011… The population aged 85 and over has increased steadily by 9% (between 2011 and 2020.) The largest growth in population in the next ten years is expected to occur in the older age groups. The number of people aged 75 - 84 is expected to increase by 41% by 2028.The number of people aged 65 and over is expected to increase by 20%.”
This trend has some notable implications for investors. First, older people may be more likely to want to downsize, so their purchasing power may be redirected more towards flats and apartments. That spending might take the form of outright purchases – older people having very often amassed more savings or collateral in the form of a larger property. As the population ages, this could prompt faster capital growth on the part of smaller properties. This would amount to a reversal of the trend that much of the UK saw in 2020 and 2021, when it was larger detached properties that tended to see the fastest growth in values.
Against that, however, we must weight the possibility that the council succeeds in its efforts to attract new and younger workers to the town. In that case, the demographic balance might swing back closer towards the mid-range. In either case, however, investors would be seeing rising demand for smaller properties and that should deliver returns that continue to improve in the years ahead.
Rising Employment
In our original 2019 post, we indicated a host of new investment projects – both public and private sector – that were either generating, or set to generate, thousands of new jobs in Halifax. Some of those schemes have now been launched and new ones have entered the pipeline but the same pattern is evident: jobs are continuing to be created at a remarkable pace.
The Covid pandemic presented Halifax with the same challenges that towns and cities faced across the world. That included business closures and job losses but it’s testament to the region’s economic resilience that job numbers have already surpassed their pre-pandemic records. In January 2022, local paper, the Halifax Courier reported that:
“The number of people employed in West Yorkshire has risen to more than one million for the first time since before the start of the pandemic… Employment in the region is now three per cent above the pre-pandemic level seen in February 2020.”
Employment has clearly rebounded strongly, but ongoing projects mean that job creation could accelerate in the months and years ahead. Calderdale Council is forecasting employment growth of 8,300 FTE jobs by 2032.
Economic Growth
In a document titled ‘Inclusive Economy Strategy For Calderdale 2018–2024’ the local council remarks that “Looking to the future, we have an investment pipeline of over £200 million to improve transport and public spaces.” It reports that the district will benefit from:
· A new train station at Elland, with an expected 250,000 passengers using the station every year.
· A £17.7 million redevelopment of Halifax bus station.
· A £120m improvement to the A629, which runs from Halifax to Huddersfield. It estimates that the scheme will create over 1,700 jobs by 2026.
· A new £60 million mixed-use development at Crosslee Park, which is expected to create 140 FTE jobs during its 4-year construction and more than 200 jobs per annum thereafter.
· An Advanced Manufacturing Enterprise Zone at Clifton, with development land for investors and the potential to generate up to 1,300 new jobs.
· The redevelopment of the Northgate site, which includes new retail and commercial space, plus the new Trinity Sixth Form Academy, which opened in September 2020. Local media report that the work is expected to see city-centre footfall increasing by 1,500 people per day.
These schemes alone are impressive enough, but Halifax itself is also benefiting from a £58 million town centre regeneration plan. On a dedicated website – Calderdale, the next chapter – the council writes:
“The Halifax Town Centre Delivery Plan is a long-term focus for regeneration, protecting our historic and cultural assets and encouraging growth. Calderdale's talent, creativity and can-do attitude have created record levels of investment and start-ups, which play a vital role in boosting our local economy.”
The town centre has already witnessed some transformative schemes. Examples include:
• £35 million invested in Broad Street Plaza, phase 1
• Construction of the £9 million New Central Library
• £40 million committed to improvements to Halifax railway station
Ongoing projects include the construction of a new multi-million-pound swimming pool and leisure centre, and a £11.7 million scheme to revitalise Halifax’s high streets. The latter project aims to deliver improved pedestrian routes, public art installations, new greener spaces around George Street, and modernisation work to two iconic buildings: the Borough Market and the Victoria Theatre.
These, together with a number of transport infrastructure projects now in progress, are all helping to create opportunities for investment by fast-growing businesses.
Growth Sectors
Halifax was traditionally a manufacturing town that figured prominently in the Industrial Revolution. Today, manufacturing still plays an important role in its economy, but much of the town’s investment has pushed in the direction of higher-value sectors. Examples include:
· Advanced engineering
· Digital industries
· Distribution and logistics
· Financial & professional services
· Hospitality and tourism
· Sustainable technologies
Invest Leeds City Region writes that:
“Lloyds Banking Group employs over 6,000 people in Calderdale, which has been a catalyst for sustained growth in its financial and business services sector. Firms like RSA Insurance and Covea Insurance have expanded their national operations into Halifax, attracted by the area’s added value, quality of life and cost-efficiency, and Sowerby Bridge is home to Lloyds’ International Data Centre.
“Calderdale’s manufacturing sector is a major employer, a reminder of Halifax’s heritage as ‘the town of a hundred trades’. Leading firms like Weir Valves, Halco Rock Tools, Hargreaves Foundry and Severn Unival as well as Kent Introl and Alco Valves in Brighouse show the diversity and skill in Calderdale’s economy.”
It also notes that the Calderdale region is home to 1,200 creative businesses.
The Tourist Market
Tourism has long been an important sector in the West Yorkshire economy. Now, with Covid restrictions easing, local planners are expecting the visitor economy to make a healthy resurgence in 2022 and beyond.
At a Yorkshire county level, tourism is worth around £9 billion per annum, and major events such as the Leeds 2023 Festival should have a positive knock-on effect on regional visitor numbers. A report published in May 2021 suggests that the festival alone could add “£114m to the region's economy and support the creation of 1,300 jobs... rising to 1,620 by 2030.”
Looking more locally, Halifax is set halfway between the Yorkshire Dales and the Peak District National Park, both of which lie within a 25km radius of the town centre, so it’s a good base for fans of all things outdoors. However, it’s also convenient for Manchester, Leeds and Sheffield, so it appeals to city-lovers too.
This position has made it a popular haunt for tourists and Calderdale Council notes that before the pandemic, its visitor economy was in excellent health. In a 2021 press release, it writes:
• 2019 was the best year ever for the borough’s visitor economy.
• In 2019, tourism was worth just under £400 million to Calderdale’s economy – a massive +14% increase from £349 million in 2018.
• Around 8.2 million visitors made day and overnight trips to Calderdale in 2019; +26% more than in 2018. The number of day trips alone increased by a whopping +27% to 7.9 million in 2019.
The council recognises the economic damage wrought by the pandemic but intends to recover its losses quickly. In its Visitor Economy Strategy 2019 to 2024, it had originally set out the following goals:
“We should aim to increase in tourism related jobs by an average of +6.5% year on year from 2019-2024, with a concentrated effort on full-time, high-quality opportunities for local employees. We should also aim to grow the industry by +£15 million per annum each year from 2019 – 2024.”
Those goals will have changed in the wake of Covid-19, but restrictions look to be much less stringent in 2022, and with staycations rising in popularity, Halifax could reasonably expect a rapid resurgence in visitor numbers. For investors with property in the town or its immediate surrounds, the lucrative short-stay market could be an option to consider.
Housing Supply in Halifax
It’s evident that many powerful forces are helping to boost demand for property in Halifax. These will doubtless have played a part in the market’s success in 2021, producing the impressive capital growth and rental yields that we highlighted earlier.
However, supply-side factors have also played a role. The lack of good-quality affordable housing has been a prickly subject for residents and local planners for years.
In May 2021, the Leader of the Council said, in a local newspaper interview:
“Local people, their children and their grandchildren, deserve good quality housing. Over the last twenty-five years, the supply of housing has gone down nationally and here in the borough we now have around 8,000 people on housing waiting lists. We also have some poor-quality housing in the borough that is just not energy efficient and needs to be replaced or improved.”
A significant challenge that the local authority faces is a lack of available land. It is prioritising brown-belt-development where possible but the supply is limited and the alternative is to expand out into greenbelt, which tends to be contentious and unpopular.
In its Economic Strategy 2018 – 2024, the council acknowledges that:
“Our unique valley topography means it’s hard to find medium or large sites for new business or residential development to meet current and future demand.”
In its 2021 housing strategy, the authority said it hoped to see nearly a thousand homes built every year but how realistic this is remains to be seen. The number of completions between 2013 and 2019 range between 220 and 370 per annum, so there’s a wide gulf between current aspirations and past records. In 2020/2021, the figure was 264.
In its 2021 Calderdale Housing Strategy (PDF format), the council notes that It scored only 50% on its Housing Delivery Test Score, which is to say 1,170 new homes delivered (net) between 2017 and
2020 against a target of 2,331. It also reported that 8,119 households were on the social housing waiting list while only 1,200 properties were becoming available each year.
Thus, the town has a distinct under-supply of homes, and relatively little space in which to develop new ones. Not only that, but as new workers come to Halifax, and as its own population grows and ages, that shortfall is likely to increase.
That combination of intense demand and restricted supply is invariably a recipe for rising values – in terms both of rental prices and average capital values.
Halifax’s Property Market in Numbers
· Total no. homes (Calderdale) 95,590
· Proportion privately rented 16%
· Proportion build before 1900 32%
· New homes required for older people +114 per year to 2032/33
(Source: 2021 Calderdale Housing Strategy)
· Cost of average home (Halifax) £188,567 1
· Average price growth (England & Wales) +7.0% 2
· Average price growth (Halifax) +10% 2
· Average rent £568 pcm 3
· Average yield (HX1) +7.2% 4
· Average yield (HX5) +7.0% 4
Summary
In 2019, we pointed out that, as a town characterised by affordable property prices, strong demand, impressive inward investment and a robust economy, Halifax ticked all the boxes for a promising investment location. So it has proved to be in recent years and, with those same characteristics looking very well established, the town should remain highly attractive to investors.
* * *
To find out more about investment opportunities in Halifax or West Yorkshire more generally, please call our advisory team on 01244 343 355 or email sales@residential-estates.co.uk
Sources:
