Oxford – England’s number 1 for growth potential

Oxford has come first with Cambridge a close second as the city with the best growth potential in the England, according to a report published this week by Arcadis.  The report highlights Oxford as having substantial potential with only Edinburgh rating higher in the UK.

The report states that Oxford and Cambridge are set to be boosted by the Oxford – Milton Keynes – Cambridge corridor.

Arcadis scored cities in several areas including economic performance, branding, housing, quality of life, quality of place, people, growth and infrastructure. These measures were used to identify the attractiveness for future inward overseas investment for social and economic growth. Oxford achieved a total score of 56.1% with Cambridge on 55.8%, with only Edinburgh topping them within the UK with a score of 65.5%. The report looked at a total of 24 UK cities.

Particularly highlighted were collaboration and JV investments as key to fulfilling the potential, especially in housing and infrastructure – which is a key focus of the Oxford-Cambridge Corridor project. The report states that the corridor will improve investment potential by reducing congestion, making housing more affordable and enhancing connectivity. The corridor is expected to play an important part in enhancing future investment, particularly in the following key areas:

·       Housing – to reduce the ratio of average house prices to average earnings;

·       Road congestion – reducing the hours spent per year in traffic jams;

·       Enhanced airport connectivity – to improve journey times to and from key airports

The first two of these has been given top priority in the work of the Oxfordshire Growth Board (consisting of all six Oxfordshire local authorities). The £215 million Housing and Growth Deal between Oxfordshire and the government is expected to be signed off at the end of this month, and will support the opening up of new housing sites around the county and the development of a Local Industrial Strategy for Oxfordshire.

The daily hysterical headline about house prices is misleading

“Oxford house prices are stagnating”  “Oxford homes least affordable in the UK”  “The house price bubble is set to burst”  “Housing Armageddon”.  Just a flavour of the typical narrative of headlines in the printed and digital media daily.  Yes, it seems we Brits are completely obsessed with property, especially when the news is dire!

Given that I am in the business of writing about Oxford’s property market, I thought I’d do a little research to establish some facts and to share them with you.

Hometrack has recently updated its UK Cities house price index with data to December 2017, so it is a good time to take a look and consider the facts.

In general UK citizens feel that they understand property it feels as if it is in our national DNA.  And yet, so many people seem to react to short-term trends, changing their investment decisions because of the headlines they read.

According to Hometrack, an average Oxford property is now worth £425,600, at a time when an average London home is worth £488,300.  So, an average Oxford property is now worth 87% of an average London property.  Only Cambridge gets close to Oxford and London with an average house value of £404,300.  But London prices have been falling so surely Oxford will suffer a similar fate?  Well the truth is no-one knows! Towards the end of last year Oxford properties did dip slightly according to Hometrack, but across the 12 months to December 2017 Land Registry data shows Oxford properties sold for values 6% up on the previous 12 months.  It is also apparent that house prices have performed better than predicted during January.

We are often told that investment in property should be long-term, but does the long-term data support that assertion?  Below is an analysis that shows Oxford house prices (in Green) vs UK house prices (in Brown).

Oxford vs UK House Prices

From the graphic it can be seen that the UK house price index had a positive consistent growth curve over the period from 1998, to 2008 after which it had a steep dip during 2009/10 with a progressive recovery to the end of 2017 as which point prices had recovered to their 2007 highs.  In comparison, since 1998 Oxford property has consistently out-performed the UK average, following a steeper growth curve, experiencing a more dramatic short-term fall during 2008/9, since when, it’s recovery has been significantly steeper recovering 2009/10 losses during 2012/13.

Oxford vs London House Prices

So how has Oxford done compared to London?  Well the analysis above shows how closely Oxford (green) typically tracks the London market (Brown).  With a gap in average values opening since 2013 as London out-performed the wider UK market because wage growth recovered more strongly and foreign investment drove the market forward.

And, let’s not forget the rivalry with Cambridge.  How does Oxford compare with Cambridge?  The analysis below is also notable for the close tracking of Oxford (dark green) and Cambridge property (teal) prices, demonstrating that both Cities benefit from their world-renowned Universities, their proximity to London and their long-term investment in the knowledge-based services sector.

Oxford vs Cambridge House Prices

What these analyses really show is that property is a reliable long-term investment, and that property owners should not be blown off course by short-term fluctuations and alarming headlines.  Even a multi-generational event like the credit crunch, which had a profound effect on property for 12 to 24 months, is now a matter of history with the long-term trend of growth having been restored.

Can house prices predict 6 Nations success?

The Six Nations Championship kicks-off today with England defending their 2017 title.  But with Scotland and Ireland showing great form in the Autumn, how can we predict the likely victor in 2018?

Well last year the first and second placed teams (England and Ireland) were also top of the leaderboard in terms of annual house price growth.  So it goes without saying, that must be a great way to predict success this year....

Applying this irrefutable logic, I confidently predict that Ireland will win the Championship this year, with England second and Wales third.  While Scotland flattered to deceive in the autumn and will place just fourth ahead of France, with Italy picking up the wooden spoon!

But will Ireland win the Grand Slam?  Well for that we will have to wait and see until St Patrick's Day when they travel to Twickenham for the final and deciding game.

Whatever your colours, this looks to be an excellent and tight Championship, but house prices never lie!

Why is Oxford the UK’s least affordable City?

On average a UK City home costs 7 times annual average income, not since 2007 has property been less affordable when the average was 7.5 times annual average income.

Contrary to popular belief London is not the least affordable City when property price is compared to average income, that dubious accolade goes to Oxford, out on its own at 11.5 times average earnings.  Next comes our other world-famous city of learning Cambridge at 10.5 times earnings.

Each of London, Oxford and Cambridge have average house prices above £400,000 with Oxford average price being £422,055 over the last 12 months.

Whilst London property has stagnated during 2017, the Capital has also experienced the strongest earnings growth, rising out of the credit crunch malaise faster and stronger than Cities such as Oxford, Cambridge and Bath.  Cities popular with commuters to London such as Brighton and Winchester have also experienced property price inflation with people benefitting from London earnings demanding property and widening the gap for people who live and work locally.

Despite fewer completed sales, demand for Oxford homes has remained strong.  In north Oxford, Kidlington property saw increases as high as 25% during 2015 and 2016 due to the new Oxford Parkway station making the village a commuting hotspot, and whilst price growth stagnated in 2017, Kidlington remains a buoyant local market.

So why is Oxford so expensive?  First and foremost, Oxford offers a superb built environment combining historic and modern architecture and vibrant sports and leisure attractions.  It is a Cit that attracts 30,000 students annually many of whom live in private rented properties, and is a world recognised seat of learning and centre for the knowledge industries.  It is strategically located in the Centre of England offering easy access North, South, East and West, and is surrounded by beautiful Cotswold countryside.  Who wouldn’t want to live in Oxford?

But, the City and County Councils have failed to enable and encourage sufficient new build homes, resulting in a supply constrained property market.  In 2017, less than 1% of the homes sold in Oxford were new build.  That under-supply of new affordable homes to suitable for first-time buyers and/or to down-sizing retired residents, is causing there to be a chronic under-supply of 2 and 3 bedroom homes.  Whlst Government policy aimed at helping first time buyers is positive, in Oxford first time buyers are not limited by stamp duty, but rather the size of deposit required by mortgage lenders.

For people who own an Oxford home the strength in values is an important part of their wealth planning, for the city as a whole it is the biggest strategic risk that the City faces.  At present it is hard to see how local or national public policy will address this crisis.

Oxford Property Market and Hammond’s Budget Promise to Build 300,000 more homes

I miss the good old days of George Osborne as Chancellor, with his hardhat and hi-vis jacket. He must have visited every new home building site in the UK with his trademark attire! For the last few years, the nearest Philip Hammond got to donning a ‘Bob the Builder’ outfit was at his grandchild’s birthday party. However, with what appears to be a change in focus by the Tories, they appear to have fallen in love with house building again with the Chancellor’s promise to create 300,000 new households in a year.

Nationally, the number of new homes created has topped 217,344 over the last year, the highest since the financial crash of 2007/8. Looking closer to home: in total there were 320 ‘net additional dwellings’ in the last 12 months in the Oxford City Council area, a respectable increase of 113% on the 2010 figure!  Evidence of a prolonged period of under-investment.

The figures show that 66% of this additional housing was new build properties. In total, there were 211 new dwellings built over the last year in Oxford. In addition, there were 43 additional dwellings created from converting commercial or office buildings into residential property and a further 81 dwellings were added as a result of converting houses into flats.

While these all added to the total housing stock in the Oxford area, there were 15 demolitions to take into account.

I was encouraged to see some of the new households in the Oxford area had come from a change of use. The planning laws were changed a few years back so that, in certain circumstances, owners of properties didn’t need planning permission to change office space in to residential use.

With the scarcity of building land available locally (or the builders being very slow to build on what they have, for fear of flooding the market), it was pleasing to see the number of developers that had redeveloped vacant office space into residential homes in the local council area. Converting offices and shops to residential use will be vital in helping to solve the Oxford housing crisis especially, as you can see on the graph, that the level of building has hardly been spectacular over the last seven years!

Now we have had the autumn budget, Theresa May and Philip Hammond have set out their stall with housing as their key focus, including more funding for the supply side and an injection of urgency into the planning system.

The biggest question is, just where are the Government going to build all these new houses? Whilst the apparent new focus on the housing market by the Government is good news for all homeowners and buy to let landlords, in the short term, demand still outstrips supply for owner-occupied and private rented homes and that will mean continued upward pressures on prices for buyers and on rents for tenants.

Tenant right to sue landlords

The Ministry of Housing, Communities & Local Government yesterday announced that it will support a Private Members Bill proposed by Karen Buck MP, which would enable tenants in England and Wales to take legal action against their landlord if their rental property is in poor condition. Secretary of State for Housing Sajid Javid MP has backed Homes (Fitness for Human Habitation and Liability of Housing Standards), which is expected to have its second reading on Friday. The bill states: that all landlords (both social and private sector) must ensure that their property is fit for human habitation at the beginning of the tenancy and throughout; and where a landlord fails to do so, the tenant has the right to take legal action in the courts for breach of contract on the grounds that the property is unfit for human habitation As part of attempts to drive out rogue landlords and raise property conditions, the government has already introduced a range of powers for local authorities. April 2018 will see both the introduction of a database of rogue landlords and property agents convicted of certain offences and banning orders for the most serious and prolific offenders. I believe that this future legislation is targeting genuine rogue landlords, however, landlords should keep an eye on how this develops.  There is already a discernible trend of tenants being more willing to complain, raising complaints with The Property Ombudsman, even where the causes of their complaint (often damp and mould related) is caused by condensation resulting from their own way of living.  Proactivity is the order of the day - provision of advice to rectify condensation, treat mould and manage ventilation and inspection to monitor its implementation is key.

Young proferssionals are unable to buy their first home in Oxford – Are the Baby Boomers and Landlords to Blame?

Talk to some Oxford 20 something, for whom home ownership appears a vague dream, and they are vexatious towards the Baby Boomer generation and their pushover walk through life, their free university education, their eye watering property windfalls, their golden final salary pensions and their free bus passes.

If you bought a property in Oxford for £25,000 in first quarter of 1977, today it would be worth £549,429, an increase of 2097.7%.

But to blame the 60 and 70 year olds of Oxford for that seems a little unfair. The mature generations joined the property party in the 1970’s and 1980’s when they were allowed to take out huge mortgages, protected by the knowledge that inflation would corrode the real value of the mortgage, increase property prices, while boosting wage growth enhancing their ability to repay.

Unlike Government, neither do I blame the multitude of Oxford buy to let landlords, buying up their 10th or 11th property to add to their buy to let portfolio. They too, merely reacted to the peculiar historic inducements of the UK property market.

Surely someone is to blame?

Margaret Thatcher and Nigel Lawson are also good people to blame - selling off millions of council houses at knock-down values and delaying ending of the MIRAS tax relief in 1987. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precluding a more equitable distribution of current housing stock. And, our current Government has had plenty of opportunity to change the stamp duty rules to incentivise those mature Oxford house movers to downsize, but have failed to act.

It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Oxford housing market is because of private landlords. Yet, I believe they are undervalued.  With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up homes we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have cut services, and haven’t had enough money to build new homes.  Homes that were provided to Oxford instead by buy to let landlords helping to reduce the scale of the current crisis.

657 homes are being bought by buy to let landlords each year in the Oxford City Council area when otherwise they might have been available to other buyers.  But at a time when the current national average deposit is £51,800, most young people are simply unable to meet lenders’ demands. And, homes bought by local landlords are not standing empty, instead they equate to 4,596 of homes for local people, most of whom either see renting as a preferred option given the flexibility required by the early years of their professional lives, or accept that they cannot yet meet lender demands for deposits.