How can 13,862 Oxford savers protect themselves from low interest rates?

The financial correspondents of many National newspapers are speculating that interest rates will stay low well into the early 2020’s.  The yield on 10-year Government bonds is currently around 0.61 per cent indicating that the banks, pension funds and institutional investors believe that the Bank of England’s base rate will on average be below 0.61% over the next ten years (i.e. the rate at which they are buying the 10 year bonds)

For those who have savings (with many depending on them to supplement their pensions) are looking for ways to improve their returns, and protect their capital, investing their savings in property is an attractive option. A simple search of the internet suggests that the best savings rate available is a 5-year fixed rate at 2.5% a year. A £300,000 nest egg would earn you £7,500 a year and even then only if the capital was left undisturbed. However, Oxford property prices and buy to let yields combine to make property investment in Oxford an appealing alternative investment. The Average Yield (the investment return) over the last five years for Oxford buy to let property has been just over 5% per annum and average property values in over the same period have risen by 28.6%.

Using these averages, the saver with £300,000 to invest in Oxford property, would have capital appreciation of £85,800 over 5 years and receive an average gross rental income of £15,900 per annum.  But investing in property seems a daunting prospect for many people, who may worry that they don’t really have the expertise to choose the right property, and don’t have the capability to manage the process of finding tenants, managing the maintenance and collecting rent.  Then there’s the stamp duty to pay on the house purchase (£9,000 on a purchase of £300,000 as a buy to let), and the need to submit extra detail on a tax return (perhaps £750 per annum for an accountant).  For property owners who don’t want to manage the property themselves, a letting agent will want up to 12% of the rental returns per annum to undertake the management. And, of course there is maintenance of the property to protect the asset value at say 7.5% of the gross rent.   Assuming the investor sells the property at the end of Year 5 there would also be estate agency fees for the sale. But even with these complications, the net returns available enormous compared to the best 5-year savings rate available.

The total net return on investment (i.e. after all of the costs have been taken into account) is £132,600.  When compared to the best 5-year savings rate I could find which would provide a net return of just under £40,000.  That a return that is over 3 times what is likely to be achieved by saving money in a bank or building society account. 

As with any investment there are risks as well as benefits to buy to let investment. For example, investing in rental property means locking up capital in an asset that may fall or stagnate in value. There could be periods where the property stands empty waiting for new tenants to be found (called a VOID in the property industry).  But with advice from the right property agent, and with a willingness to take a medium to long-term view, most of the risks can be off-set.  And, with interest ratss so low, and set to continue to be low over the coming 5 years, the return from the right property investment more than off-set the risks involved.

Investment opportunity in Oxford city centre

Hello all,

Tis rare we see any one beds become available in the centre of Oxford nowadays but when they do I always make a point of banging the 'buy, buy, buy!' drum. Well here is another opportunity....

This one bedroom ground floor apartment currently on the market with Connells is a cracking investment IF (if, if ,if!) it is purchased under the right terms.

Currently it is on the market for £390,000. Internally it looks to be sound so this is a tick in the box although a closer look at viewing would be necessary.

The ground floor location and the price are th sticking points but only to a certain degree,

Its true value sits around £325,000 - £350,000 rather than the price stated. I know this from property sold in this particular block in addition to its neighbouring blocks and the notable difference with this particular apartment is that it is situated within the social housing section. Having said that we currently rent two in this particular block which both command very, very good rental figures which have appreciated year on year along with the captial value and have not once had a void period.

In the neighbouring blocks for Empress Court I currently and actively manage 4 ground floor apartments and they have all appreciated in an upwardly manner both in rent and price since their purchase. As an example on the block in question my client purchased a one bedroom apartment for £235,000 in 2011. He then sold this property in 2015 for £350,000.

This particular apartment would fetch £1250 - £1300pcm on the rent and against the £325,000 I think it is worth this would fetch a 4.6% yield which in the centre of Oxford is almost unheard of nowadays!

A very good buy at the right price.

Call me if you would like to know more.

Best

Richard

Property owners are re-mortgaging to lock-in low interest rates

According to data from LMS, the number of re-mortgages hit 36,195 in August which is up 8% from July and up 45% annually.  This suggests the homeowners are looking to capitalise on record low interest rates in the wake of the base rate cut and meant that re-mortgage activity reached its highest level in more than seven years, since July 2009.

The value of gross re-mortgage lending fell by 2% from £6.0bn in July to £5.9bn in August, as homeowners’ average re-mortgage loan amount dropped by 6% between July and August from £172,184 to £162,268.

LMS data confirms that the average re-mortgage loan-to-value (LTV) fell from 58% in July to 54% in August: the same value registered in August 2015. The dip in LTV, coupled with the fall in the average loan amount, suggests that homeowners are exercising a degree of caution accessing ever-cheaper deals by reducing the proportion of borrowing against the value of their homes.

Those who re-mortgaged in August 2016 released £31,589, which is 11% less than was the case in August 2015, when the average amount released stood at £35,590

Re-mortgaging should not be the sole preserve of either owner-occupiers or buy-to-let landlords.  All property owners should take advantage of the low interest rates.  In an article to be published next week, The Oxford Property Blog looks at the benefit of investing in Oxford's student property market.  Releasing equity to re-invest in the student market could help optimise yields and better balance a portfolio.

Another cracker in Cowley!

Morning all,

You may recall that I have cast my eye over this development in the past and here I go again. what was true then is no different today with this development offering good prices (for Oxford!) Vs good rental achievements and invariably the number always tend to work.

Situated in Lizmans Court on Silkdale Close, this property is currently on the market with Chancellors, Cowley office.It is currently on the market for £240,000, so putting Inspector Gadget hat on her are my thoughts and findings........

This property will command a rent of approx £1050pcm . I watch these rents with a cautious mind as they have tended to vary (depending on agent) quite alot. For example there is currently one on the market for £950pcm whereas another agent would have you believe they will achieve £1150pcm on one that is currently advertised.

There is an easy way to cut through varying opinions which is to review what they have actually rented for rather than what an agent 'thinks' they can get for them.

The 3 most recent lets have gone for £1000pcm and £1050pcm. When marking your price the location and condition of the apartment should be taken into consideration. It is fair to say that there will be subtle differences in the rent based on this criteria. Interestingly the property rented for £1000pcm was reduced from £1045pcm and the property rented for £1050pcm was reduced from £1100pcm.

These reductions were only necessary based on the original rental projection from agent or landlord rather than a negative trend in this development. After all we have all of the required evidence dating back to 2006 which demonstrate no voids for the properties let in Lizman Court. It is merely about projecting the price accurately rather than ambitiously.

£1000pcm based on asking price gives you a 5% yield which is your golden figure and any price negotiated below that makes this an even better investment.

The price is not far off the mark. The two most recent sales in this location went for £235,000 on the 18th March 2016 and £235,000 on the 31st July 2015. £240,000 is about right but naturally I would still be wanting a deal.

#neveroffertheaskingprice!

Call me for more.

Best regards

Richard

Investment opportunity in Wheatley

Morning folks,

FAIRFAX GATE, WHEATLEY

I hope you are all well.

There is much to be said about village life. The countryside walks, the fresh air, the quiet (I could go on) but perhaps the most intriguing things about villages is what fantastic investments they can make for landlords. Take a look at this one....

I spotted this one which is currently on the market with Chancellors, Headington office. The first thing that jumps out at me other than the location is the condition. It's always nice for investors to purchase a property where minimal work is required for a fair price (more on the latter point to follow!) and this is good to go!

This cute little house would be absolutely ideal for a couple setting up home or a small family with one child and the perfect environment to raise a child as well. It is on the last point that I go back to my previous point on villages representing fantastic investments.

Village primary schools tend to be quite sort after in most locations in the UK (within reason) and Wheatley Primary School is certainly no exception. I base my comments on hard fact folks. We had a property in Wheatley not long back where there was literally a queue of people fighting it out for the property.

The property ticks most of the boxes other than price. If we are looking to make the number work in our favour then an offer is necessary for me rather than asking price (DUH!) £285,000 at a rent of £1050pcm brings you in with a yield of 4.4% which is very respectable in the demanding Oxford market. I find interest in the asking price of £300K and determine that an offer should be welcomed by said agent, considering the last 2 properties to sell in this location were for £265k on 19th August 2015 and prior to this £235,250 on the 19th January 2015.

A sound investment for the right price ladies and gents.

Have a good day.

What will the 0.25% Interest Rate do to the Oxford Property Market?

I was speaking with a Boars Hill landlord who owns a few properties in the city when he popped his head in to my office while his wife was shopping in town shopping (and let’s be honest talking about the Oxford Property Market is a lot more interesting than clothes shopping!). We had never spoken before (because he uses another agent in the city to manage his Oxford properties) yet after reading my blog on the Oxford Property Market for a few weeks, the landlord wanted to know my thoughts on how the recent interest rate cut would affect the Oxford property market and I would also like to share these thoughts with you.

It’s been a few weeks now since interest rates were cut to 0.25% by the Bank of England because the Bank believed Brexit could lead to a materially lower path of growth for the UK, especially for the manufacturing and construction industries. You see, for the country as a whole, the manufacturing and construction industries are still performing well below the pre-credit crunch levels of 2008/09, so the British economy remains highly susceptible to an economic shock. This is especially important in Oxford, because even though we have had a number of local success stories in manufacturing and construction, a large number of people are employed in these sectors. In Oxford, of the 74,277 people who have a job, 3,794 are in the manufacturing industry and 3,172 in Construction meaning

5.1% of Oxford workers are employed in the Manufacturing

sector and 4.3% of Oxford workers are in Construction

The other sector of the economy the Bank is worried about, and an equally important one to the Oxford economy, is the Financial Services industry. Financial Services in Oxford employ 968 people, making up 1.3% of the Oxford working population.

Together with a cut in interest rates, the Bank also announced an increase in the supply of money via a new programme of Quantitative Easing to buy £70bn of Government and Private bonds. Now that won’t do much to the Oxford property market directly, but another measure also included in the recent announcement was £100bn of new funding to banks. This extra £100bn will help the High St banks pass on the base rate cut to people and businesses, meaning the banks will have lots of cheap money to lend for mortgages.  That should have a huge effect on the Oxford property market (a £100bn would be enough to buy over a quarter of a million homes in Oxford).

It will take until early in the New Year to find out the real direction of the Oxford property market and the effects of Brexit on the economy as a whole, the subsequent recent interest rate cuts and the availability of cheap mortgages. However, something bigger than Brexit and interest rates is the inherent undersupply of housing (something I have spoken about many times in my blog and the specific effect on Oxford). The severe under-supply means that Oxford property prices are likely to increase further in the medium to long term, even if there is a dip in the trajectory of growth in the short term. This only confirms what every homeowner and landlord has known for decades - investing in property is a long term project and as an investment vehicle, it will continue to outstrip other forms of investment due to the high demand for a roof over people’s heads and the low supply of new properties being built.

For owner-occupiers in Oxford the most challenging step is to get on the first rung of the ladder.  Once they buy they can continue to have confidence that the value of their asset will rise.  Taking advantage of lower mortgage rates (and several high street lenders have launched well valued fixed interest offers since the Bank of England rate cut) and if eligible shared ownership models remain a sensible option.  For buy to let investors there are also terrific new fixed rate loans available (e.g. Aldermore’s 2.99% 5yr fixed rate at 70% LTV) suggesting that many lenders still see excellent investment returns to be available.  In Oxford, landlords should take a long-term view combining capital appreciation with rental yield returns to assess their investments. 

Those who stay focused on the financial fundamentals of the Oxford market rather than the scare mongering stories in the press, will continue to find excellent returns and steal a march on those who hesitate.

Pressure growing on fees charged by letting agents to tenants

Letting Agent Today reports that SAFEagent, the kitemark scheme for agents offering Client Money Protection, has backed the National Approved Lettings Scheme's (NALS) call for a cap on letting agents' fees.

Yesterday, NALS said a cap on tenant fees would represent an appropriate way of limiting excessive charges, rather than a blanket ban. 

John Midgley, chair of the SAFEagent Steering Group, has praised NALS for opening the debate on letting agent fees, describing the organisation's suggestion of a cap as 'sensible'.

"SAFEagent exists to help protect and support the consumer, and anything that helps make renting fairer can only be a positive thing," says Midgley.

"We'll be getting involved with discussions on capping fees, and we urge others to do the same."

NALS chief executive Isobel Thomson has urged the industry to speak with one voice and offer the government a solution to the problem instead of sleepwalking into a blanket ban on fees

The Renters’ Rights Bill, which proposes an outright ban on fees charged to tenants, mirroring similar legislation in place in Scotland is currently making its way through parliament.

My own view is that the term Letting Agents covers a very broad spectrum of organisations, from those adopting professional standards to those who operate unscrupulously.  At present the orientation of the industry is ‘to do it to’ tenants to protect the landlord from tenants.  There is an opportunity for tenants to take responsibility, and recognise that if they were buying a property instead, they would need to take the time and effort to present their data, and themselves in the best way to ensure that they achieve their desired outcome.  Too often when renting properties, tenants fail to recognise that they will benefit from taking a similar level of personal responsibility.

Landlords value good tenants.  Research shows that most landlords would accept lower rent to secure good tenants, who look after their property and pay their rent on time.  However, too often, their experience is very different, with tenants failing to maintain acceptable levels of cleanliness, and failing to report routine maintenance required, resulting in substantial cost to return the property to its former standard once that tenancy ends.

In Scotland, it appears that the ban on tenant fees, has resulted in a shift of costs towards the landlords themselves.  Nationally, in the wake of stamp duty and mortgage interest rate legislation, there is a shift by landlords way from 12 month tenancies towards short-term holiday and business lets where returns are felt to be higher.  At a time when the UK supply of housing is so low, anything that risks reducing the supply of properties for residential use has to be a bad thing.  Heaping an ever greater financial burden on landlords would risk more withdrawing from the residential letting market.

It seems far better for Government to legislate to target the unscrupulous letting agents, and encouraging professional agents to charge appropriate fees to both landlords and tenants, reflecting the two-way nature of property rental.

Buy to let of the week

Marketed by Amelies, this 2 bedroom semi in Greater Leys looks to be a real opportunity for investment by a buy to let landlord. 

Priced at £270,000 the property looks to be in a good state of repair and is well located in an area that is popular with first-time buyers and tenants. 

I think at £270,000 this property looks to be priced at the very top-end.  An offer accepted at £260,000 would be about on the money. 

For rental, this house, furnished would certainly achieve £1,000 all day long, and given its good state of presentation £1,050 should be achievable.

A gross rental yield of 4.8% plus 12 month appreciation of 4% points to an overall gross return on investment of 8.8% over the course of the first 12 months.

What are the most common ‘rules’ broken by Oxford’s tenants?

According to a study of 1,000 private tenants carried out by Direct Line for Business, failing to pay rent on time or at all is the most common term broken by tenants that is included in their tenancy agreement.

Other common rule 'bends' include smoking in the property, keeping a pet, damaging or making alterations to the property or changing the locks.

A smaller proportion of tenants admit to either causing disturbances to neighbours, sub-letting a room without notifying the landlord, redecorating without permission or failing to check the carbon monoxide.

My own experiences in Oxford reflect these findings.  Smoking in a property that has a no-smoking term is common, but hard for a Landlord or their agent to prove.  Only through our detailed and regular inspections of managed properties can we identify if an additional person is living in a property, if a pet has been in residence or if a tenant has damaged the fabric of the building via unauthorised DIY. For Landlords who manage their own properties, it is vital that they inspect their properties themselves, to identify issues to take action to enforce the terms of the tenant agreement.

Oxford property prices hold-up well, with some notable exceptions

Rightmove has become a dominant channel for house sales and lettings for the UK market.  And, it is a great source of comparative data.  Now the summer is over, and as we move into autumn, a lot of people will be looking to move house before Christmas.  The agents know that this is an important window of opportunity, and they will out there knocking on doors and posting leaflets to identify people who want to move to get them signed up.  Too often the home owners approach conversations with agents without sound knowledge about what their house is worth.  So what has been going on in and around Oxford over the last 12 months?

The average price of homes sold on Rightmove in Oxford over the last 12 months was £471,092.  That’s compared to the national average of £214,000.  So Oxford is an expensive place to buy property.  Indeed, the City has the largest gap between average house price and average salary for a UK city.  Oxford achieved prices are 4% up on average compared with the previous 12 months.

But anyone who lives in Oxford knows that the local property market is an amalgamation of sub-markets, and to get the true picture it is necessary to analyse each sub-market to gain the true picture.

So top of the pops in terms of average achieved selling price is Summertown (£802,558), followed by Boars Hill (£706,096), Cumnor Hill (£451,849) and Botley (£450,839).  More affordable areas include Kidlington (£373,801), Cowley (£367,624) and Greater Leys (£254,303).

However, to gain a true insight, it is important to consider how achieved sale prices have changed over the last 12 months.  And that reveals a different picture.  Kidlington is top performer with average achieved prices rising 24% over the last 12 months.  Followed by Marston (up 13%), Botley and Greater Leys (both up 12%).  At the other end of the is Wolvercote (down 8%) and Boars Hill (down 22%).

So what are the factors that have influenced Oxford property prices, causing such a spread of performance across the local market?

Kidlington is performing well responding to the investment in the local infrastructure, offering residents easy access to central Oxford due to its proximity to Oxford Parkway, its excellent bus routes and the investment in new homes.  Marston continues to benefit from strong demand created by its proximity to John Radcliffe and its wider medical campus.  Botley’s performance reflects its convenience for commuting in and out of Oxford by Road and by rail, and Greater Leys remains a terrific location for people taking their first step on Oxford’s housing ladder and its proximity to some of the City’s major employers.

At the other end of the list Wolvercote has had a bad year blighted by the roadworks that have created lines of traffic and general inconvenience.  It will be interesting to see over the coming 12 months if it bounces back once the chaos subsides.  The 22% reduction in prices achieved in Boars Hill, needs to be considered with some caution, as the volume of transactions is low and so the data can swing wildly depending on the actual properties that are marketed.  However, there is some evidence to suggest that top-end properties have been most impacted by Brexit and economic uncertainty.

Too often home buyers, home owners and buy to let investors do not equip themselves with the facts.  They don’t do their homework to understand Oxford-wide and sub-market trends for capital growth.  Buy to let landlords are too often obsessed with rental yield, when Oxford offers great opportunities to combine strong yields with excellent capital appreciation.  House buyers can often overlook factors which could adversely impact capital growth, limiting their options when the time comes for their next move.

Mortgage costs fall for Oxford's landlords

Mortgage lenders are progressively seeking to attract new buy to let investors by offering lower cost mortgages, reacting to the Bank of England rate cut, and, most importantly, signalling their continued recognition of the sound investment returns buy to let offers.


Software firm Mortgage Brain says the cost of a five-year fixed buy to let mortgage with a 70 per cent Loan-To-Value is now eight per cent lower than it was in March 2016. It claims that with a current rate of 2.8%, the reduction in cost for this product equates to a potential annualised saving of £738 on a £150,000 mortgage.


The cost of the lowest rate three year fixed BTL mortgage at 2.64% and a two year fixed at 2.89% - both with a 70 per cent LTV - have seen a six per cent reduction in cost since March and offer landlords an annualised saving of £504 and £540 respectively.


Buy to let mortgages with a 60 per cent LTV have also come down in cost over the past six months with a five year fixed down five per cent, a three year fixed down four per cent, and a two year fixed down two per cent since March.


However, the firm says some two year tracker BTL mortgages have increased in cost.


The cost of the lowest rate 80 per cent LTV product at 2.97 per cent, for example, is now 14 per cent higher than it was in March 2016. At 1.8 per cent over two years the cost of a two year tracker with a 60 per cent LTV is now three per cent higher, while the same product with a 70 per cent LTV is now one per cent higher.


With house prices in Oxford continuing to rise, and rents also being reported as up in August, Oxford’s landlords should take advantage of the low interest rates to extend their portfolios.

Rents up almost everywhere - but pace of growth is slowing.

According to Letting Agent Today rents for new tenants across the UK continued to rise during August and now stand at an average of £913 a month, a 3.1 per cent increase on the same month of 2015.

However, the latest survey by HomeLet says the pace of growth is moderating.
The 3.1 per cent recorded in August is comparable to annual increases of between 3.5 and 3.8 per cent over the previous four months. By contrast, annual rental inflation was running at close to 6.0 per cent this time last year.

Eleven of the 12 regions surveyed by HomeLet have shown rises, but London and the south east rents have dipped noticeably.

The regional picture is as follows:

• East of England: average rent £915 - up 5.8% over the past year;
• Wales: £654 - up 5.2%
• North West: £699 - up 4.3%
• West Midlands: £674 - up 3.3%
• South East: £1,034 - up 3.3%
• Northern Ireland: £627 - up 2.8%
• Greater London: £1,497 - up 2.7%
• South West: £799- up 1.6%
• Yorkshire & Humberside: £640 - up 1.3%
• Scotland: £629 - up 1.1%
• East Midlands: £621 - up 1.0%
• North East: £535 - down 1.6%
• All-UK: £913 - up 3.1%

BTL of the week

This 2-bed apartment is on the market with Penny and Sinclair and looks to be an interesting investment to us.

Harberton Mead is a good popular development that is well located for Oxford Brookes University and John Radcliffe Hospital.

A ground floor apartment which won't appeal to everyone, we'd say this was probably top-money, but it appears to be in good repair and able to be put straight on the rental market for very little outlay.

Furnished, we estimate rental value of £1,400 pcm which at the asking price offers a 4.2% gross yield.

We'd advise a cheeky offer at £385,000 for a no-chain deal good look very interesting indeed!

Oxford’s landlords engaged in a delicate balancing act

Recent figures from the HomeLet Rental Index show the cost of a new tenancy in the UK private rental market rose to £913pcm in the three months to August 2016.  That’s an increase of 3.1% since August 2015.

Much of the press coverage would have us believe that Landlords are making super-profits at the expense of ‘generation rent’, but the reality is that landlords are performing a delicate balancing act in which they are acutely aware of tenants’ worries about affordability, but also aware of the need for their investment to achieve a realistic yield.

So why has this become such a balancing act for landlords?  And, why does Government need to think very carefully before introducing any further pressure on the buy-to-let (BTL) sector?

I and many others have written about the stamp duty surcharge that was introduced in April this year, and which created a surge of property purchases in advance, distorting the market, and creating a fall in demand in the 3 months following April.  However, two further pieces of legislation are only now being properly understood by landlords – the removal of the 10% wear and tear tax relief, meaning landlords can now only claim for the actual amount they spend; and, the phasing-out of mortgage interest tax relief from 2017.

Together, these changes are placing significant pressure on landlords who have borrowed to acquire and grow their portfolios.  For many this is driving down net yields to 2% or less, and for some who are over-leveraged with debt the changes could push them into a loss-making position.

Many commentators have suggested that this will result in a wave of property being sold as private landlords divest their properties and look to invest elsewhere.  However, according to the Association of Residential Lettings Agents (ARLA) 61% of agents have seen no real movement in the level of housing supply in July, and my own experience in Oxford is that there has been no discernible change in August either.  This suggests that to date landlords are not running to the exit door.  It is likely that this is partly because there are few better alternative investments available at present – with interest rates at historic low levels, and uncertainty dragging on capital markets.

Most Oxford landlords recognise that low void periods, and strong capital appreciation of their assets, combine to ensure that long-term their investments remain attractive.  However, for individuals who currently pay income tax at 40 to 45%, the changes have a particularly heavy impact.  To help reduce the impact of Government tax changes, many investors are now looking to manage their rental properties via limited companies, and treating mortgage interest as a business expense.  According to Mortgages for Business, the number of BTL mortgage applications completed by limited companies in the first half of 2016 was up to 30% of all BTL completions compared to just 18% in the same period in 2015.

Contrary to the pinion expressed by popular and sensationalist commentators, Oxford’s and the UK’s landlords are performing a high-wire balancing act, where they are aiming to re-structure their investments and take a long-term view of total returns (yield and capital appreciation) in order to minimise placing too great an extra cost on their tenants.  Whilst there will always be an unscrupulous few who can correctly be accused of fleecing their tenants, it is quite wrong to apply that to the majority of landlords who understand their responsibility to their tenants.

Are Oxford’s landlords meeting the needs of families?

A few weeks ago I was asked a fascinating question by a local politician who, after reading the Oxford Property Blog, emailed me and asked – “Are Oxford Landlords meeting the needs of tenant-parents bringing up their families in Oxford?”

What an interesting question, I thought, but I didn’t have an answer for him!

Irrespective of whether you are tenant or a homeowner, to bring up a family, amongst the most important factors are security and stability in the home. A great bellwether of that security and stability in a rented property is whether tenants are constantly being evicted. Many tenancies last just six or 12 months with families apparently at risk of being asked to leave with just two months’ notice, and on occasion with no good reason being provided.

Some “left leaning Politician’s” are saying we need to deal with the terrible insecurity of Britain’s private rental market by mandating longer tenancies of 3 or 5 years instead of the current six to twelve months. However, the numbers seem to be telling a different story. The average length of residence in private rental homes has risen in the last 5 years from 3.7 years to 4 years (a growth of 8.1%).  The proportion of private rented property occupied by tenants with dependent children, has gone from 29.1% in 2003 to 37.4% today.

This data suggests that landlords do not spend their time seeking opportunities to evict a tenant as the average length of tenancy has steadily increased. It also shows a proportional shift in occupation of private rental property by families with children suggesting an effective response to changing demand.

Looking specifically at Oxford, compared to the National figures, of the 17,662 private rental homes in Oxford, 4,008 of these have dependent children in them (22.7%), which is well below the National average (37.4%).

But, when considering Oxford, it is important to take account of its peculiarities:  it is a ‘young’ City with nearly one-third of its population being aged between 18 and 39 years.  It is home to some 32,000 students, many of whom rent their homes from private landlords for all or part of their studies, and the average Oxford property value is some 16 times the local average income.  That’s a greater affordability gap than London (as a whole).  As a consequence, demand for private rental properties is fierce, it comes from a diverse range of people, and it comes from a younger age profile of tenant than is typically the case in comparable Cities.  As a result, it is to be expected that the proportion of private rental properties occupied by tenants with dependent children is lower as a proportion of the whole.  For example most students are either single or have not yet commenced their family. 

So, if as it seems, landlords are responding to tenants’ needs when it comes to the length of tenancy (average length of tenancies are increasing), and responding to demand from tenants with families (the proportion of tenants with dependant children is increasing) -  I find it strange that some politicians are calling for fixed term 3 and 5 year tenancies. More heavy-handed regulation may encourage some landlords to stop renting their property out in the first place, cutting-off the supply of much needed rental property, meaning tenants will suffer financially as rents go up due to a greater imbalance of supply and demand.

In Oxford the only long-term solution to the affordability of property is to build new houses which I discussed last week.  Until that happens the City is in need to a greater supply of good quality rental property provided by high quality landlords who can afford to invest. 

Heavy-handed legislation that further discourages landlords could break the fragile but functional market that exists in the City.