Confusing market for Oxford property investors

It is interesting to note two things about the current property market – there are fewer approved mortgage agreements (currently at an 18 month low), and yet, the latest evidence is that property prices are still rising.  The latest house price data from Nationwide shows that house prices increased by 0.6% in August with annual growth rising from 5.2% in July to 5.6% in August.

On the face of it this seems to be conflicting data, but Nationwide offer an hypothesis that the data shows that there has not only been a reduction in demand for property, but a corresponding reduction in the level of supply, meaning that the market has remained balanced, allowing house prices to continue to rise.  Like many commentators the Nationwide forecast little to zero growth for the 2^nd half of the financial year, placing the blame on uncertainty resulting from the vote to leave the EU.

As regular readers will know, I don’t agree that there is any hard data to support an assertion that Brexit has yet had an impact on the Oxford property market.  I do believe that the decisions made in relation to stamp duty and mortgage interest relief for landlords has and continues to have an impact, which is wrongly being blamed on Brexit.

The house price increase is also being impacted by another factor.  Around 64% of people own a home, this figure is only marginally higher than last year.  However, that hides a much more significant trend and one that has sustained over a number of years.  Now 52% of homes are owner without a mortgage i.e. their owners have either settled their mortgage to own outright, or are investing in new property without a mortgage.  This further explains the confusing data – fewer approved mortgages but continued house price growth!

However, this also hides a generational divide – people over the age of 39 years old are far more likely to own their own home with a third of homes in England being owned by people over the age of 65 years.  People aged from 20 to 39 years are known as ‘generation rent’ with good reason.  The owner occupier rate is expected to fall from a peak of 70% to 60% by 2025, with an additional 1.8m households becoming private renters by 2025 that’s 1 in 4 of UK households.

In Oxford this trend is very plain to see, investment in property is overwhelmingly coming from people aged 50 years and older or from foreign nationals.  Demand for rental properties is much more typically coming from people aged between 18 and 40 years of age.  The big question is:  is this sustainable? And, is it desirable?  If the answer to both of these questions is ‘yes’ then it can’t possibly be a good idea to bash the landlords in the way the government has chosen to so do.  If the answer is ‘no’ how is Government policy going to be effective?  Limiting the supply of much needed rental property in the short-term by discouraging landlord investment; whilst in parallel failing to address the severe under-supply of affordable and starter homes to arrest the growth in demand for rental properties.