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!
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