Oxford rents rise by 22.6% since 2005

The Oxford Property Market has been particularly fascinating over the last 12 years when we consider what has happened to Oxford rents and house prices.

There’s currently much speculation about what will happen to the rental property market during the Brexit negotiation. I believe we must look what happened in the 2008/9 credit crunch (and what has happened since) to judge rationally the possible ramifications for long-term investors in the Oxford property market. An important, yet overlooked measure is the performance of rental income vs house prices (i.e. the resultant yields over time). In Oxford (as for the rest of Great Britain), notwithstanding a slight drop in 2008 and 2009, property rentals have been gradually and consistently increasing.

The income from rentals has been progressively increasing over the last 12 years. Today, they are on average 22.6% higher than they were at the beginning of 2005. In fact, over the last five years, the average growth has been 2.4% per annum. However, the observant readers will be noting that we are ignoring an important factor – our friend inflation.

Turn the clock back to 2005, and take a property being rented for say £900 a month hat is still being rented at £900 a month today, in Spring of 2017. While the landlord is not getting any less income, £900 is no longer worth as much. Let me explain, in 2005, £900 may have bought a two-week 4* holiday in Italy. Yet, holidays have increased in line with inflation (which has been 38.5% since 2005), so our holiday would cost today £1,246 (£900 + 38.5% inflation = £1,246). Therefore, the landlord could no longer afford the same holiday, even though they have the same amount in pound notes from their rental property.

This means, when we compare rents in Oxford to inflation since 2005, Oxford landlords are worse off today, when they receive their monthly rental income, than they were in 2005 by 15.9% in real terms (rents increased by 22.6% since 2005, less the 38.5% inflation since 2005 – net affect 15.9% drop). 

However, rental income is not the only way that landlords generate money from property as property values typically increase over time. Although in the short term, cash flows are diminishing, many Oxford landlords will be content to off-set that for the increase in capital value.

Property values in Oxford have risen by 77.3% since 2005

This equates to a very strong 6.44% average increase per annum over the last 12 years. This will make those Oxford landlords and investors feel a little better about the information regarding rents after inflation.  6.44% annual return compares well when considered vs alternative financial investments over the same period.

Looking forward, the prospects of making easy money on buy to let in Oxford have diminished.

If you are investing in the Oxford property market, do your homework and do it well. While some yields may look attractive, there are properties in many areas that do not have the solid fundamentals in place to sustain them. If you are looking for capital growth, you might be surprised where the hidden gems really are. Take advice, even ask your agent for a portfolio analysis like I offer my landlords.

Thoughts from a train

Sitting on a train to London provides space for contemplation.  April has been an odd month.  Demand has been impacted by Easter and bank holiday breaks, at a time when the availability of rental properties in Oxford is high.  Why so high?  It is the 12 month anniversary of the pre-stamp duty rush to buy last March.  Those new buy to let properties have added to the supply in Oxford in a month somewhat decimated by holidays.

What does this mean for landlords?  Well property fundamentals are based on location, condition and price (relative to comparable properties).  The location of a property is fixed and the exposure of a portfolio geographically can only be changed over the medium to long term.  Condition is not fixed.  Investing in the decor, general condition and quality of fixtures and fittings makes a difference at a time when tenants have choice.  If the condition can't be improved further to enhance the property's attractiveness, then only price remains.  

Prospective tenants are savvy, if they have choice they will assess value for money in relation to location and condition.  Landlords need to be honest with themselves and be just as savvy in assessing the rent they are seeking vs the competing properties.

Will rents fall in Oxford in 2017, for some properties, yes.  Is that a long term trend?  I think not.  Oxford tracks London but lags in terms of time.  London had a tough 2016, Oxford may follow in 2017.  I doubt we will see rent deflation across the board, but at the top of the market we may see pressure e.g central Oxford apartments if demand from foreign students is adversely impacted by the political focus on immigration.

So is Oxford losing its shine?  No, capital appreciation remains strong.  Accepting say 3% lower rent to avoid a void, will ensure an overall annual return of 6% plus when income and capital appreciation are combined.  For many without debt, this could rise to 8 % plus.

The thing to avoid is a void!

Landlord Seminar - Inheritance Tax Planning for Property Investors

1^st June 2017 at 6pm to 7.30pm at The Oxford Spires Hotel

In association with Martin & Co, Oxford & Twomey Wealth Management

Oxford’s landlords own valuable, appreciating assets.  Day to day, the focus is on maximising the income generated from those assets by optimising rental yield and minimising periods of void.  Most landlords expect to retain the ownership of their properties, seeing their appreciating value as an integral part of their plans for retirement, and part of the legacy that they will leave for their children and grandchildren.  In virtually all cases the value of their assets exceed £500,000 in many it exceeds £5m.

I can’t think of any other investment to which so little consideration is given to optimising the investment for tax particularly inheritance tax.  Most people don’t think there is anything that can be done now to better look after future generations, but the truth is that there are some easy, sensible and inexpensive actions that can and should be taken – all it takes is for someone to explain them!

And, that someone is Andrew Twomey, whose business Twomey Wealth Management, is part of St James’ Place Wealth Management partner practice.  Educated in the UK and in Australia, Andrew works with clients in London, Oxford and the Cotswolds to assist them to build, grow, protect and preserve their wealth.  Happily for us, he also has a really great way of explaining things in a simple and action orientated way.

So, if you own one or more properties in Oxford or elsewhere, and you have an inkling there might be more you could do to get your affairs in order -  please come along.  We start at 6pm and will run to 7.30pm, at the Oxford Spires Hotel on the Abingdon Road in Oxford.  Numbers are limited so please email me on info@OxfordPropertyBlog.co.uk to reserve your place.

Back in Silkdale Close, Cowley for this investment cracker!!

Well the number certainly work with this one folks.

On the market for £220,000 with Chancellors, Cowley you will expect to hit a rent of £975pcm on this which would give you a 5.3% return on your investment, assuming you purchased at asking price. As always is the case with my advice, I wouldn't!

I say this because even at a glance I think the property needs a re-dec and shower unit. Tap operated showers are not really what tenants want or expect for their money so money will need spending here. In addition to this some of the furniture needs an overhaul as well. I approximate spending around £2500 to bring this property to standard but a viewing would be good to further assess the condition. A photo can lie after all!

Other than the above it really doesnt have much of a downside. These are really shrewd investments. Just ask the previous owners of 21 Lizmans Court who purchased the property in July 2012 for £155,000 and then sold it on 10th May 2016 for £210,000 representing a 27% increase.

Good right?

Aside the work these flats are minimum fuss and a real hidden gem in Oxford for those of you looking to add to the current portfolio or purchase for investment for the first time.

Please feel free to call me for more information.

Best regards

Richard

The perfect investment in lovely Kennington

There are many reasons to consider village life - the quiet, nice walks, community feel and good local schools. Well in addition to all of this how about a village that offers close access to Oxford Centre and is also conveniently placed for routes out of Oxford?

Step forward Kennington!

This cute little one bedroom property on The Avenue is currently on the market with Simpsons in Abingdon (??) for £250,000. It is worth a second (and third) look.

Internally it is very hard to fault so no major work necessary here to property itself or the furnishings, assuming they get thrown into the equation!

Its garden is lovely and a real draw for potential tenants as well.

You are looking at £925 and £950pcm which gives you 4.5% yield assuming asking price but an offer is always worth it.

Behind city centre and North Oxford, Kennington tends to be the most sought after location in our area.

Happy to talk about this one and others folks!

Best regards

Richard

A little gem in Reliance Way, Cowley!

Good afternoon all,

I hope you are well.

I spotted this one in Cowley. I am sure you locals in Oxford will know Reliance Way quite well and what was true in 2010 is still true now......It makes for a cracking investment!

You can find this one on the market with Chancellors for £350,000. Recent selling history saw one sold on the 1st July 2016 for £340,000 and prior to that number 144 Reliance Way sold for £347,000 on the 26th April 2016. In short the price is thereabouts but that should never deter you from an offer!

The going rental rate for this apartment is £1295 - £1325pcm. At the lower end (always cautious me!) which gives you 4.5% on the yield.

Internally it looks sound but this will need a viewing to inspect closer. If it is as it is presented in the pictures then you will need very little done to it.

With the recent house price index from March to April reporting a slowing down in annual property growth, now could be a very good time to jump in there with an offer on this apartment. It has a rich rental history throughout the block and very rarely do you see voids on these units.

Call me if you would like to know more.

Best

Richard

Legal questions raised about online estate agents

This was first reported by Property Industry Eye:

A leading barrister has raised several questions about the duties owed by online estate agents to their customers.

In the Opinion, prepared for the UK PropTech Association (UKPA), Ian Rees Phillips of 6 Pump Court explores how the nature of up-front payment for estate agency services may create a conflict of interest between the online estate agent and property vendors.

The opinion concludes that the online agents owe a fiduciary duty to home seller clients and that there is a “significant danger that breach of fiduciary duty is baked into the online estate agent model.”

Those online agencies who operate with self-employed agents in the field are in even more “danger” of their clients “bringing a claim” against them.

Eddie Holmes, chairman of the UKPA, said: “It is extremely important that founders operating new business models, enabled by technology, bear in mind the legislative environment in which they operate. The world of PropTech is no different to any other in this regard.

“This Opinion  by Mr Rees Phillips serves to highlight some fundamental questions about the online agency business model.

“We urge those businesses operating in this space to consider these questions as a matter of priority and communicate what steps they take to protect their customers – something which should, ultimately, help those businesses create competitive advantage for themselves.”

Oxford Property Blog believes that this relates primarily to their financial model whereby fees are taken up-front irrespective of whether a property is sold.  It is reported that some online agents sell just 30% of the houses they list, meaning that 70% of vendors pay the agent a fee, but fail to sell their house.  Whereas, most high-street agents only charge a fee on the completion of a successful sale and they would routinely budget to sell no less than half of the properties they list, with the best-performing achieving 60% or more. 

The online model breaks the link between the vendor's financial interests and that of their agent - no sale: no fee ensures those interests are aligned throughout the process.  Up-front fees, reduce the need for online agents to remain focussed and committed to a successful completed sale, and may encourage above-market valuations of property in order to secure a listing.

Rental trends reported by RIghtmove

Based on Rightmove data, there are 12% more properties available for tenants to choose from compared to the first quarter in 2016.

Nationally, it is taking 10% longer on average to secure tenants than during the same period last year.

In the SE of England, compared with Q4 2016, there has been a 1% reduction in average achieved rent, whereas compared to the same period last year rents are up 1.3%.

Oxford typically tracks the London market quite closely, albeit with a lag and with lower valued peak rents.  Looking at London, compared with rents in Q4 2016, rents in Q1 2017 are up 1.5%, however, when compared to the same period in 2016 rents are 4.2% down.  To date, Oxford rents have held-up well, however, properties are currently taking longer to let than during the same period last year.  Following the buy to let buying spree in March last year, those properties are now coming available, increasing the availability of properties and offering tenants more choice.

Will Oxford experience the falls in rent experienced in London?  Well, I don't have a crystal ball, but on balance I'd predict a period of low growth in rents and for some properties stagnation.  However, I would expect demand to hold-up reflecting the under-supply of homes and the strong fundamentals of the City's economy.

I expect one bedroom properties to hold-up the best with larger properties from 2-bed apartments upwards taking a little longer to let.  Landlords should not panic, but should be open to accepting offers from tenants, recognising the benefit of prolonging a void period.

Demand for professional HMO properties is likely to remain strong, with tenants demanding a high quality of fit and finish, and good quality, well-equipped communal areas and en-suite facilities.

Rooms  without en-suite facilities, or within homes that are rather tired in terms of interior décor and facilities are most likely to be hit by the reducing demand given the narrowing of the gap between top-priced rooms and one-bedroom and studio apartments.  The cost of renting a room in Oxford is very high, and I'd expect to see some.

The lowest fixed mortgage rate in 5 years!

Morning all, We thought you may be interested in this offer. Fresh from our recent landlord seminar at Oxford Spires Hotel, and with the new tax changes now officially in force, now is a very good time to be looking at your current circumstances to determine the best way to protect your biggest investments. Lowest 5 year fixed rate in history... by a mile The lowest ever 5 year fix was launched today at 1.29%. We're assured it's not a mistake but you can be certain it won't be available for long. Arrange a callback with one of our advisers on our website. Representative example: A mortgage of £193,051 payable over 23 years, initially on a fixed rate for 5 years at 1.29% and then on a variable rate of 3.75% for the remaining 18 years would require 60 payments of £809 and 216 payments of £1,045. The total amount payable would be £275,160 made up of the loan amount plus interest (£81,209) and fees (£900). The overall cost for comparison is 2.83% APRC representative. Earlier in the week Nationwide announced that house prices had dropped in March for the first time in almost two years. Bear in mind though that the House Price Index for the whole of the UK had risen 15% in the last 2 years and 30% in the last 4. How does this affect me? If you aren't looking for a new property and are happy in your home it's easy to ignore the UK housing market. However, increasing property prices can affect your mortgage in a positive way. An example Say you bought a property for £200,000 in 2013 and took out a 90% mortgage (£180,000) over 25 years. 4 years later, if the property has increased by the UK average of 30% it will now be worth £260,000. Even if none of the mortgage capital had been repaid this is a new loan to value (LTV) ratio of 70%. And a lower LTV ratio means less risk for the lender and therefore a better rate for you.  How much can I save? You can use our house price calculator to work out the change in your area and our best buy tables below to work out the potential savings. Happy Easter everyone! Residential Best Buys Buy To Let Best Buys

If you would like more information about this please feel fre

Westgate will change the face of Oxford…and for the better!

Earlier this week Savills and the Westgate Alliance launched the marketing of residential units included as part of the Westgate shopping centre development.  Mill Stream House as it has been named, is a single block of 59 one and two bedroom apartments across the road from John Lewis and next to the old mill stream.  This week the first 20 apartments were released for reservation off-plan, ranging from £347,000 for the cheapest one-bedroom apartment to £564,000 for a two bed apartment on the North end of the block with a balcony overlooking the mill stream.

Whilst no show apartment is yet available for viewing, it is clear that the apartments will be small in comparison to other central Oxford apartments, but with high quality finishes.  There will be lift access, but there is no provision for parking, which whilst understandable given the central location, will no doubt deter some buyers.

Rental yields will be good particularly for the one-bedroom apartments with between 4.5 and 4.8% -beds look likely depending on purchase price.  Yields on the 2 beds will be lower, and rental demand is more likely to be impacted by the lack of parking for these properties.  Overall, however, this is set to be popular with buy to let investors.

On Tuesday, there was a launch event hosted by Savills which was well attended by potential buyers, and just 24 hours after the first 20 apartments were made available 12 had been reserved.  Some of the best apartments will form part of phases 2 and 3 releases scheduled for May/early June.

I believe that the Westgate development will impact Oxford in a similar way in which a similar John Lewis led development impacted Cardiff.  In Cardiff, the development acted like a magnet to shoppers, restauranteurs and retailers effectively relocating the city centre to what had been a rather under-developed part of town.  It seems to me that something similar will happen in Oxford, which has been crying out for a decent retail experience for years.  For many residents of Oxford Castle, Empress Court and Tennyson Lodge, the disturbance and inconvenience caused by Westgate’s development has at times seemed unbearable.  However, once complete I expect them to be well rewarded as their properties become even more desirable.  Offering residents a short walk to world-class shopping, eating and drinking.  In turn The Lion Brewery, Castle Mews, Rowland Hill Court and Stream Edge apartments will also feel the ripple effect as The Castle area becomes THE place to live in Oxford.

It is terrific to see new housing stock being made available in Oxford.  City centre apartments are an ideal way to keep the Oxford vibrant and alive, and maintaining the City as jewel of Central England.