Asking prices hit record highs

The Bank of England has warned that the housing boom means that borrowers are stretching themselves like never before to buy property, with over 27% borrowing more than four times their annual income.  To put that into perspective, it is the highest figure ever and double the ratio of eight years ago.

This appears to be borne-out by Rightmove data which reports that first-time and second-time properties in the UK have hit all-time highs of £189,840 and £272,031 respectively.  Rightmove goes on to report that the average asking price for newly-marketed properties has jumped 1.5%, at the same time as a 5% drop in the number of properties coming to market compared to a year ago.

In Oxford 1 bed properties currently on the market range from £350,000 to £450,000 for an apartment in central Oxford or Summertown down to £160,000 to £200,000 in East Oxford.  The lowest priced Oxford 1-bedroom apartment currently on sale is valued at £6,154 per square metre.  There is a studio apartment measuring less than 13 square metres with an asking price of £180,000, that’s £14,000 per square metre.  To put that into perspective, the highest priced 4 bed properties are valued at around £10,500 per square metre; and the lowest priced 4 beds are valued at around £2,600 per square metre.  On this basis (value per square metre) first time buyers in Oxford must pay between £6,154 and £14,000 per square metre, when families pay between £2,600 and £10,500 per square metre.

In line with the national trend, Oxford is also experiencing a fall in the number of transactions (completed sales) down 14% on the previous 12-month period.  Of the 2,845 sales completed, just 2% were new build, up on the 1% previously.  However, of the total new build 59.8% were detached properties and just 18.6% apartments and 7.2% terraced properties.  So, new build is not only below the required level, but the Council (via it’s planning approvals) and house builders are prioritising detached 4 and 5 bed properties over first and second time buyer properties.   

This appears to be a peculiarly ‘Oxford’ problem.  Across the South East as a whole apartments and terraced properties account for over half (51%) roughly double that achieved in Oxford.

Is the Bank of England right to be warning about the level of debt as a multiple of income for house purchase?  Well, it is worried particularly about the sustainability of that debt as interest rates rise.  For many first and second time buyers, BoE interest rates have not exceeded 0.5%, meaning mortgage debt has been cheap.  We are now entering a period where interest rates will progressively normalise towards their long-term trend rate of nearer 5% - a tenfold increase on what many have ever experienced.  This is a valid concern where those home owners do not move quickly to fix their interest rate, insulating themselves from the expected rise in base rates.

First-time buyers in Oxford currently have no choice – they are expected to pay the most for the space they acquire, in one of the Country’s most expensive real estate markets.  Until local planners and house builders work together to increase the supply of 1 and 2 bedroom properties, this will not change, and the Oxford market will remain stubbornly unaffordable.