Oxford landlords must resist the urge to sell-up!

 Misleading headlines are influencing too many Oxford landlords to sell their assets.

Daily headlines preach the end to the buy to let miracle AND never-better house sales market.  The combination of these mis-leading headlines is influencing too many Oxford landlords to sell-up.

But, why is selling the wrong idea?

There are two dominant economic theories about the UK economy over the coming 3 to 5 years, one gloomy, one optimistic.  But both suggest Oxford landlords should retain their assets.

The ‘gloomy’ economic theory says we are in for a period of low growth caused by stagnating and negative global outlook suppressing demand.  This theory points to long-term low interest rates, suppressed and volatile equity markets and a drag on average wages.

The ‘optimistic’ theory says growth will return quickly and inflation will spiral with the government seeing inflation as beneficial to reduce the burden of post-pandemic debt causing fiscal response to be delayed.  Wages will rise as a post Brexit labour supply constraint bites, with commodities, and asset prices also rising quickly with or ahead of inflation.

The correct response to either outcome for an Oxford landlord or indeed anyone who owns property assets is to hold on to them and consider incremental property purchases.

In the gloomy scenario, Oxford property offers a safe, low-risk and high yielding return on capital employed.  The combination of rental income and capital appreciation ensures that most Oxford landlords achieve a double-digit percentage return on investment annually with exceptionally low associated risk.

In the optimistic scenario there will be a clamour to buy assets as inflation reduces the value of savings.  Incomes, rents, and asset prices will rise rapidly and using debt to leverage investment in assets will be attractive to many as asset values rise leaving debt as a diminishing proportion of total value.

Where Oxford landlords sell-up now only to return to the market later, they will have to pay the 3% surcharge – a total stamp duty cost that is often over £15,000 for an Oxford property.  This barrier to re-entry is being overlooked by many Oxford landlords who are selling their assets with no clear plan for the reinvestment of the capital released.

And, finally, most commentators believe demand for rental properties has not peaked.  With landlords selling property many predict that rising demand and lack of rental properties will cause rents to rise above inflation exacerbating the affordability crisis in Oxford rents.  Landlords who remain in the market will benefit from low voids, the ability to select only good quality tenants and returns above inflation.

My advice to Oxford landlords is hold onto your precious assets.  Hire a good quality letting agent who will find good tenants, look after your property, and take the ‘grind’ out of staying compliant.  Retain the low-risk inflation matched income, and know that, whatever the outcome, their buy to let will see them right!

38% of Oxford Homes Are Over-priced When Advertised For Sale

Recent research by Yes Homebuyers states that Oxford is one of the top 4 places where properties advertised for sale are over-priced and suffer a price reduction.  38% of all Oxford homes have the asking price reduced.

Too often, estate agents are responsible for setting unrealistic price expectations by over-valuing properties to secure a sole agency agreement that assures them of a competition-free period of 16 to 20 weeks.  Once sole agency is secured, the estate agent advises the vendor to reduce the price to the market level.  

In any other industry this would be regarded as unscrupulous business practice, but in Oxford estate agency it seems to be winning formula.  Vendors regularly select the agent that provides the highest valuation and several Oxford agents have a policy of over-valuing as a result.

Despite 38% of properties experiencing a price reduction, Oxford homes consistently sell for an additional 4% to 5% discount on the asking price.

So should vendors care about estate agents over-valuing their homes?  According to Rightmove the critical period for a house advertised for sale is the first 4 weeks.  Homes that fail to sell in this period typically spend much longer on the market before finding a buyer, delaying the vendor's move and often causing their sales chain to break down.

The first 4 weeks usually coincides with the period when an over-valued house is advertised above market value, directly undermining the vendor's chances of a sale in this critical period by presenting poor value to potential buyers.  By the time the price is reduced to the market level, the critical 4 week 'golden period' has be squandered, consigning the vendor to a longer process than would have been the case had the property been marketed at the correct price from the word go.

And, there is no excuse for agents who over-value.  All agents have access to the same sources of evidence to determine the true market value of a property.

Vendors should force estate agents to compete on factors other than their valuation - how they support their clients, communicate with them, actively participate to progress a sale from offer to completion, where they advertise and how they present the property.  Those of the real factors that make a difference.

It is unfortunate that the biggest agent in the Oxford market is the one known to over-value most often.  As long as that continues, vendors will be poorly served.