Investment opportunity for a 2 bed in central Cowley!

Good afternoon all,

For those of you still in the hunt of building your empire please have a look at this one which I happened across during my investment search.

Currently on the market with Chancellors Estate Agents for £350,000 you can expect to see  this let for £1300pcm which returns 4.4% which is a very healthy yield for such a good location and for a very nice apartment.

To be honest there is very little that would need to be done with this. It may need a paint in places and any carpets may need inspection when the property is vacant. A viewing would definitely be in order for a closer look but its turnaround to make it available to new tenants from purchase is minimal.

They are popular for both renting and purchasing. There is a rich history for both. Only last week I had one available for rent and it went 4 days into the marketing. The sales activity paints an equally positive picture which bodes well for any future capital gain.

From the 30th March 2007 to present day number 116 Reliance Way was purchased at £250,000 and sold on the 27th March 2015 at £321,000. At today's suggested sales price it has appreciated by over £100,000 in the last 10 years.

Call me if you would like more information on this and others.

Best regards

Richard

It’s time for Our Civic, Business and Academic leaders to step-up to the plate

There is now little doubt that UK domestic political uncertainty is combining with Brexit to undermine demand for homes across Oxford.  It is time for Oxford to take a stand and make clear at home and abroad that Oxford is open for business and remains a welcoming, international city of academic excellence and knowledge based services, as well as a European centre for manufacturing and automotive excellence.

The recent UK election was widely expected to be a time-limited period of uncertainty, which, like previous elections, would create a short-term softening of demand for rented accommodation and create a drag on new homes listed for sale.  It now seems certain that the sense of uncertainty will continue as parliament wrestles with the implication of a government with no overall majority in the House of Commons.

The uncertainty created by the UK election result, seems likely to exacerbate press attention on Brexit both in the UK and internationally.  To date, the press has highlighted immigration as the central issue, with much commentary creating an impression that the UK is no longer a safe nor welcoming place for foreign nationals to come to study and work.  For Oxford, this has unquestionably undermined demand from foreign nationals wanting to live, study and work in our great city.  Nationally demand for University places from the EU has fallen by 7% compared to last year.  Over the same period, demand for places from the UK has also fallen by 5.6%.  This ‘double whammy’ is evident in Oxford by the number of rental properties that are available in areas typically popular with foreign students and downward pressure on rents that have typically increased at 2 to 3% per annum.

With Brexit certain to dominate the political headlines over the coming 18 months, places that depend on their international reputation as centres of excellence for learning, knowledge-based services and manufacturing must take direct responsibility for communicating their multi-cultural values, their openness and their desire for sustained immigration for work and learning.

Oxford must take a leadership position in this, reflecting its pre-eminent position as one of the World’s best academic centres of learning.  It is time for our civic leaders to step-up and take control of Oxford’s narrative.  The leaders of our big businesses and Universities must take every opportunity to jump on planes and promote the unique, welcoming environment for which is Oxford is rightly known around the world.  The City’s international alumni need to be called-on to ensure our positive message is heard around the World.

On 23^rd June 2016 Oxford voted by 70% to remain in the EU.  As a City dedicated to excellence, with a rich contribution to politics, science, the arts, medicine and engineering globally, it is incumbent on us all to make our voices heard, making clear that Oxford is and will remain a place of inclusion, security and culture for people from around the world.

The Waitrose effect

A recent study commissioned by Lloyds Bank shows that houses in close proximity to a Waitrose, Marks and Spencer, Sainsbury’s or Iceland are most likely to gain a higher house price premium than the town average in which they are located.

Properties close to an M&S have the second highest premium at £29,992 than hoes further away.  Proximity to a Sainsbury’s add £26,767 and Iceland £22,767.  Waitrose reigns supreme, however, with a typical £36,480 uplift.

On average walking proximity to a supermarket adds an average 9% according to the study, with Aldi, Lidl, Morrison’s or Asda adding on average £21,400.

Regular readers will recall that in a recent article I outlined changes that I expect to see in Oxford’s private rented sector, with tenants renting for longer periods of their life and increasing demand for homes that allow their young families to grow with 3 beds, and proximity to schools and supermarkets.

The Lloyds report is a two-edged sword for Oxford’s landlords, as it suggests there will be a cost premium to buy properties that will be demanded by this group of tenants, but equally landlord’s should have confidence that that premium will be maintained over the medium to long-term, most likely increasing demand from tenants and allowing a premium rent to secured.

Owners of central Oxford properties should hope that a similar ‘John Lewis’ effect will be felt once the Westgate development completes.  Experience from Cardiff where a comparable John Lewis-led development occurred, suggests that the John Lewis effect could be even more significant than the Waitrose effect.  Owners of properties in Oxford Castle, Tennyson Lodge, Empress Court, The Lion Brewery and Castle Mews should see an uplift in capital values once the new apartments in Mill Stream Edge are sold-out.

Commisery vs. Home sale regret – which estate agency model is best? PART TWO

This article follows last weeks, and is the second of two articles that considers the pros and cons of online and traditional estate agency business models.  This week, I will consider the true cost of each model, the relative importance of maximising the price achieved vs. reducing the costs involved; and, how agents secure a price premium.

Is the online offer as cost competitive as it appears?

On first look, the online offer looks unbelievably cheap, and hence the Purplebrick’s marketing focus on ‘comisery’.  But, is it really that much more efficient?

A good-performing traditional estate agent expects to sell around 65% of the properties it lists, and clients only pay a fee if they sell. According to a recent survey, online agents average up to 50%.  That means that half of online agent clients will pay a fee but will not achieve a sale.  Of those that don’t sell, 17% go on to appoint a traditional agent to sell their property.

Per 100 properties listed, an online agent in Oxford will receive fees on every property.  At the current average of £995 that’s £99,500 in fees.  If only 50 of the properties sell, that’s £2,000 per property sold.  For the traditional Oxford agent mentioned above with average fees of 1% of sale price, 65 properties will sell at an average fee of £4,085 per property sold. 

Based on this, the online model under-cuts the traditional model by 50% per property sold in the current market.  But that is achievable only because clients whose houses fail to sell, effectively subsidise those whose houses sell.  Great news for sellers who sell, but very bad news for those who don’t, many of whom then appoint a traditional agent anyway.

What’s more important sale price or agent fee?

Because an average Oxford property costs £408,500, each 1% extra achieved on a home’s sale price delivers around £4,000 of additional return for the seller.  That means an accepted offer at 95% of the asking price for an average Oxford property is £388,000 or £20,400 below asking price.  It seems to me entirely fair to assume that an agent whose fee is proportional to the price achieved will have more incentive to try to maximise the sale price, rather than encouraging their client to settle for a ‘good’ offer because their fee has already been paid.

An agent that negotiates hard on behalf of their client, achieving offers from multiple parties will achieve a 2 to 4% premium.  Let’s assume a 3% premium is secured on the above property resulting in a sale price of £400,000, that’s a price premium of £12,000.  Where the traditional agent fee is 1% (a typical level for Oxford) their fee will be £4,000, resulting in a net gain for the client of over £7,000 (having allowed for the online agent fee of £995).  So, despite paying a fee four times the value of the online agents, the client is over £7,000 in profit.

It is this fact which is causing questions to be asked about the online agency model.  Can a model where the fee is paid up-front, really encourage that agent to strive to achieve the 3% premium described above.

Selling an Oxford home is all about maximising the price you achieve

Homes in Oxford are expensive, securing the best possible price is THE most important factor.  When 1% of an average home equates to over £4,000, working with an agent you trust, and who will work with you in the way you want is the most important factor. 

The true premium paid for traditional estate agency is almost impossible to determine with the data that is currently available.  Increasingly we will see hybrid agency models emerging where seller will be able to personalise the approach their agent takes to reflect their own requirements.  It seems to me that every seller should focus on maximising the sale price they achieve and ensuring that a buying chain is nurtured across the line so sales complete.  That can only be done through dedicated attention to detail, by experienced agents.

Commisery vs. Home sale regret – which estate agency model is best?

Which model of estate agency is best – online or traditional, and how do they differ?  Which model serves its clients best? Does an estate agent have a fiduciary duty? (a ‘fiduciary’ being a person who holds a legal or ethical relationship of trust with one or more other parties) and, does either model undermine that duty?  Finally, which offers the best value?

I will consider these and other questions from the perspective of a property owner over the next couple of weeks.

How do the models differ?

Traditional estate agency is based on no-sale, no-fee.  If the agent fails to sell the property their client pays nothing.  If they secure an offer that proceeds to an exchange of contracts, they claim their pre-agreed fee.  Typically, that fee is quoted as a percentage of the achieved sale price. For an average Oxford home that sells for £408,500, the current average commission paid is 1% or £4,080. 

With online agents, the client pays an up-front fee which covers in advance the cost of marketing, and pays the agent its profit margin.  If the property sells both parties benefit, but if the house does not sell the client has still paid the agent’s fee.  In Oxford currently, the average paid for an online agent is c£995.

Both approaches typically advertise a property via the same online portals, but typically the online model is less comprehensive in terms of the support provided for example some online agents expect clients to conduct their own viewings, and provide only rudimentary sales progression, others offer a menu whereby the client can pay a larger fee for a fuller service.  The traditional agency model is more uniform and includes all aspects of marketing, viewing management, negotiation of offers, sale and chain progression.

Some sellers prefer to work with multiple agents, believing that competition between agents ensures that they work harder to ensure that they (as opposed to their competitor) achieve the sale.  Others prefer to select just one agent who they trust to provide them an effective service. 

Where two traditional agents work in competition only one fee will be payable by the client to whichever agent secures the sale.  Typically, the fee paid using multiple agents is higher than the fee paid to a sole agent.  Where an online agent and a traditional agent work alongside each other, two fees may be paid i.e. the online agent charges their standard up-front fee, but the 2^nd agent secures the sale, making their fee additionally apply.  It could therefore be argued that the up-front nature of online agent fees discourages the appointment of multiple agents.

Currently online agents have around a 4% market share which is growing steadily, traditional agents have a 96% market share.

What is the agent’s responsibility?

A recent Opinion, prepared for the UK PropTech Association (UKPA) by 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 and traditional agents owe a fiduciary duty to their home seller clients, and that there is a “significant danger that breach of fiduciary duty is baked into the online estate agent model.” 

What causes this potential conflict of interest? The fact that the fee is paid up-front, and is paid irrespective of whether the home is sold or not is the central concern.  But, there is a further concern, that once paid, the agent no longer has an incentive to put every effort into securing the best sale price for their client.

Whilst the traditional agent is typically more expensive, because it is a proportion of the sale price achieved, the agent’s financial interest is aligned its client’ interests.  Because it is only payable for success, it requires the agent to accept and manage a greater level of risk, encouraging a more realistic initial valuation or else risking incurring cost without succeeding in achieving a sale.