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.

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.

Oxford Rents Set to Rise to £2,338pm in Next 5 Years

It’s now been close to 18 months since annual rental price inflation in Oxford peaked at 3.4%. Since then we have seen more humble rent increases. In fact, in certain parts of the Oxford rental market over the autumn, we have seen some slight reduction. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may be running out of steam?

Well, possibly in the short term, but in the coming few years, it is my opinion that Oxford rents will regain their upward trend as demand for Oxford rental properties outstrip supply, and this is why.

The only counterbalance to rental growth would be an increase in rental stock (i.e. the number of rental properties in Oxford). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning fewer new properties will be bought to rent).

Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would reduce throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords would look to serve notice on tenants, sell up and invest their capital elsewhere.

Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Oxford, that Oxford landlords are actually either re-mortgaging their Oxford buy-to-let properties instead or converting their rental portfolios into limited companies to side step the new taxation rules.

The sentiment of many Oxford landlords is that property has weathered economic shocks well in the past, and there is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and crypto-currencies.

Remarkably, there is some good news for tenants, as the Government recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth.  It really is swings and roundabouts!

Rents in Oxford over the next 5 years will rise by 9.2%, taking the average rent for a Oxford property from £2,141 per month to £2,338 per month.

Rents in Oxford over the last 12 years have risen by 21.5%. I don’t expect the future rise to be a straight-line either, because I have to take into account the national and local Oxford economy, demand and supply of rental property, interest rates, Brexit and other external factors. Please see the graph for my projections

In the past, making money from Oxford buy-to-let property was as easy as falling off a log. But with these new tax rules, new rental regulations and the overall changing dynamics of the Oxford property market, as an Oxford landlord, you are going to need to work smarter in the future and keep abreast of information, advice and opinion to hand on the Oxford, Regional and National property markets.

Oxford is the 3rd least affordable place to buy a home

House prices in the capital are now 14.5 times the earnings of an average Londoner, according to Hometrack, hitting the highest level on record. London was followed by Cambridge, where the average property is 14.3 times earnings, Oxford (12.6) and Bournemouth (10.1).

Last week’s budget confirmed Government plans to link Cambridge and Oxford by road and rail, with one million new homes planned along the arteries created. 

Oxford’s achieved prices for houses sold over the last 12 months is 6% up on the previous period according to Land Registry data, despite a 17% reduction in the number of completed transactions.  Whilst that is welcome news for current Oxford property owners, it points to continued supply constraint.  Oxford’s second-time buyers – young couples looking to trade up as they plan a family, can’t afford to move, meaning that first-time buyers face an acute shortage of available, affordable properties.  The new stamp duty incentive will not solve Oxford’s supply constraint.

New-build houses account for only 3% of available homes, with the majority being larger properties targeting already affluent Oxford house buyers.  Less than 1% of starter homes are new build.

Oxford City Council and Oxfordshire County Council must free-up development land and fight to secure above a fair share of the one million new homes planned.  The current target of 100,000 new homes is insufficient unless they are centred in Oxford or within easy commuting range.

Newspaper headlines have announced the demise of buy to let in Oxford, predicting a ‘great sell-off’ of private rented property.  To date, this has not materialised, and given the 6% increase in values, it should not be a great surprise that savvy landlords have held onto their assets.  However, private investors are not making new investments due to the stamp duty surcharge imposed on 2^nd homes. That should worry young people looking to live and work in Oxford.  There is already an under-supply of good quality rental properties in Oxford, and many more will be required given how long new build homes take to come available.

Increasingly private landlords are recognising the affordability benefit offered by villages outside Oxford.  Kidlington, Wolvercote and Marston continue to offer value for money, and rental yields above 4% in the first year of ownership.  Kidlington particularly has benefitted from the opening of Oxford Parkway station and regular bus routes to Oxford.  Kidlington is now recognised as a destination for couples and young families leaving London but wishing to retain easy commuting access.

Top slice mortgages may help Oxford investors

Which? – the consumer organisation - says a handful of buy to let mortgage lenders have found a way of helping so-called ‘portfolio landlords’ to borrow more than they might have expected under tough new regulations.

Last month the Prudential Regulation Authority tightened the criteria which individual lenders had to use when handling applications from portfolio landlords - that is, those with four or more buy to let properties. 

But now the Which? Reports that “a handful” of lenders offering ‘top slicing’ deals, which allow landlords with low rental yields to make up their shortfall through other income. 

“Top slicing takes a landlord’s personal income, such as their salary or pension income, into consideration when assessing their affordability, rather than just looking at the profitability of their property portfolio. Top slicing is good news for landlords buying higher value properties which might have lower rental yields, as it allows them to use external personal income to bridge any shortfall” says a statement from Which? 

With Oxford prices rising again over the last 12 months by around 6%, and average Oxford homes costing £414,817, Oxford offers lower rental yields over the initial 3 to 5 years following purchase.  As a result, ‘Top slicing’ products would appear highly relevant for landlords aiming to increase their investment in Oxford property.

The consumer group says currently the lenders who undertake this are Aldermore, Barclays, Bluestone, Clydesdale Bank, Coventry, Mansfield, Metro Bank, NatWest, Vida and Virgin Money.

However, because of the restrictions imposed on most lenders by the new PRA criteria, some 14 companies have pulled out of the portfolio landlord market completely, says Which? This includes Santander, the TSB and the Post Office.

Oxford Buy-to-Let Return / Yields 3% to 7.1% a year

The mind-set and tactics you employ to buy your first Oxford buy to let property needs to be different to the tactics and methodology of buying a home for yourself to live in. The main difference is when purchasing your own property, you may well pay a little more to get the home you (and your family) want. When buying for your own use, you will often buy at the top end of your budget.

With a buy to let property, your goal is a higher rental return – a higher price doesn’t always equate to higher monthly returns – in fact quite the opposite. Less expensive Oxford properties can bring in bigger monthly returns. Most landlords use the phrase ‘yield’ instead of monthly return. To calculate the gross yield on a buy to let property one basically takes the monthly rent, multiplies it by 12 to get the annual rent and then divides it by the value of the property.

If an Oxford buy to let landlord has the decision of two properties that command the same amount of monthly rent, the landlord can increase their rental yield by selecting the lower priced property.

To give you an idea of the sort of returns in Oxford...

Now of course these are averages but they provide a fair representation of the gross yields you can expect in the Oxford area.

With the total amount of buy to let mortgages amounting to £199,310,614,000 in the country, landlords need to be aware of the investment performance of their property, especially in this era of tax increases and tax relief reductions.

However, before everyone in Oxford starts selling their upmarket properties and buying cheap ones, yield isn’t the only factor to consider when deciding on which Oxford buy to let property to buy.  Void periods (i.e. the time when there isn’t a tenant in the property between tenancies) are an important factor and those properties at the cheaper end of the rental spectrum can suffer higher void periods.  Apartments can also have service charges and ground rents that aren’t accounted for in the gross yields. Landlords also make money if the value of the property goes up. In Oxford, because property is expensive, landlords should consider the total return on investment, considering both the net yield (the gross yield less other expenses e.g. service charges) and the increase in property values.

In Oxford, for example, over the last 20 years, the average price paid for the four different types of Oxford property have changed as follows:

·       Oxford Detached Properties have increased in value by 269.5%  

·       Oxford Semi-Detached Properties have increased in value by 284.2%

·       Oxford Terraced Properties have increased in value by 274.3% 

·       Oxford Apartments have increased in value by 261.8%

It is very much a balancing act of yield, capital growth and void periods when buying in Oxford. Every landlord’s investment strategy is unique to them. If you would like a fresh pair of eyes to look at your portfolio, be you a private landlord that doesn’t use a letting agent or a landlord that uses one of my competitors – then feel free to drop in and let’s have a chat. What have you got to lose? 30 minutes and my tea making skills are legendary!

More renting than mortgaged households within eight years

A cultural shift in home ownership is happening before our eyes.

According to a NatWest economist, by 2025, the number of mortgaged households in the UK will be just under 6m, while the number of households in private rental accommodation will be a whisker more, at 6m.  Sebastian Burnside says the cross-over will happen in late 2024.

Burnside is reported by Property Industry Eye as saying : “We think it’s a fairly comfortable bet that by 2025 we will have more households renting privately than owning their homes with a mortgage, which is a big cultural shift for a country like the UK and something that’s being driven by those underlying demographics.”

There are already more people owning a home outright than people buying with a mortgage, and the number of outright home owners is still growing.  Since 2013, outright home ownership has been the biggest form of housing tenure in the UK. By 2024, about 9m households will own their homes outright. 

Slowing Oxford Property Market? Yes and No!

Being a buy-to-let landlord in Oxford is a balancing act many do well. Talking to several Oxford landlords, they are conscious of their tenants’ capacity and ability to pay the rent but feel with their own costs rising, there is now pressure for rents to rise.

Historic evidence suggests that the rents new tenants have to pay typically increase during the summer months. June, July & August is a time when renters like to move, demand surges and the normal supply and demand seesaw mean tenants are normally prepared to pay more to secure the property they want to live in.

Rents in Oxford on average for new tenants moving in have risen 0.9% for the month, taking overall annual Oxford rents 0.9% lower for the year

However, several Oxford landlords have expressed their apprehensions about a slowing of the housing market. I personally feel their negativity may be misplaced.

The other side of the coin for property investing is capital values (which are of interest to all the homeowners in Oxford as well as Oxford buy-to-let landlords).  I believe the Oxford property market has been trying to find some level of equilibrium since the New Year.  According to the Land Registry

Property Values in Oxford are 7.49% higher than they were 12 months ago, despite a drop of 0.07% last month

Yet, I would take those figures with a pinch of salt as they reflect the sales of Oxford properties that took place in early Spring 2017 which are only now exchanging and completing during the summer months.

The reality is the number of properties that are on the market in Oxford today has risen by 41.02% since the New Year at a time when the total number of transactions is down by 17% which will have a dampening effect on property values. As tenants have less choice, buyers now have more choice and that will temper Oxford property prices as we head towards 2018.

Be you a homeowner or landlord, if you are planning to sell your Oxford property in the short term, it is crucial, especially with the rise in the number of properties on the market, that you realistically price your property when you bring it to the market.  With the increase in choice of properties, the balance of power during negotiation generally sways towards the buyer.

County at 'tipping point' as nearly 200,000 people predicted to live in Oxfordshire by 2030

The following article is a cut and paste from the Oxford Times and is written by Georgina Campbell.  I've taken the unusual decision to re-post the article here as I feel it raises a number of interesting factors that show how housing policy (or lack thereof) is and will continue to hamper the Oxford's and the Counties future wealth.  I feel that Georgina has captured and presented some of the fundamental issues that our Civic and County leaders must address to ensure that the City remains the attractive, multi-talented, multi-cultural and vibrant Cities in the UK. Housing policy is not just a matter of building more affordable homes (although that is a critical component), it is also about recognising demographic shifts and providing suitable housing, enabling family homes to be freed-up for growing families by providing older residents suitable and attractive down-sizing options.

The article reads:

OXFORDSHIRE’s growing and ageing population is at 'tipping point' with nearly 200,000 extra people predicted in the county by 2030, public health bosses warn. 

The county’s director of public health, Dr Jonathan McWilliam, said the way services are run needs to change to prevent a crisis in people’s access to health and social care. 

Predictions for the next 15 years show the number of people over the age of 65 will increase by 53 per cent and those over the age of 85 will increase by 96 per cent. 

And although the fact that people are living longer 'should be shouted from the rooftops', Dr McWilliam hopes his independent report will be the catalyst for change in the provision of services. 

He said: "The biggest challenge is the increase in the number of people in the county and the number of people that will be here in the years to come. 

"This issue has been with us for the last decade. 

"The problem is this creeps up on us, it happens in slow motion and we do not take notice until we reach this tipping point where older services need to be replaced with new ones." 

The tenth annual public health report predicts an additional 183,900 residents will be in the county by 2030. 

And the challenge of managing a growing population is made even harder by a raft of other problems, he warns. 

Crippling house prices are affecting recruitment in health and social care - a problem which needs to be addressed to cope with the growing demand. 

Dr McWilliam said: "It is becoming increasingly difficult to recruit the staff we need to fill nursing, caring and ancillary posts. 

"In the last few weeks I attended meetings where the hospital and social care services were spelling this out very clearly. 

"Some hospital wards are for example reported to be running with 25 per cent vacancies." 

Oxford is the least affordable city with house prices being 16.7 times higher than annual earnings, on a par with London, and bosses warn they might need to look beyond the county to towns like High Wycombe to find enough affordable for housing for the influx of extra workers. 

Dr McWilliam added: “Other options such as building hostels for workers are also being explored. 

"We have identified the problem, we have reached a tipping point and we have to work together to find a solution, even if we do not know exactly what that solution is yet." 

Some developments for key worker housing have been proposed, such as 83 homes at William Morris Close in Temple Cowley (see more on the development in page 4), but many more would be needed to cope with the extra demand. 

Dr McWilliam is also calling for more joined-up thinking in housing developments, stating that the focus needs to be on how people can live a healthier life in their community. 

He added: "The key message is: health is planning and planning is health. 

"Of course every development is different, some are large and some are small. 

"But there are some basic principals in terms of dementia-friendly streets, cycle and pedestrian lanes that can be carried through all new developments." 

In order to tackle the 'whole raft of issues' Dr McWilliam is calling for central government, organisations and residents themselves to come together and work towards an overhaul in the way services are provided. 

He added: "We have never been in this situation before, which is why we do not have all the solutions to hand right away. 

"But I think we have time for organisations to find out what they need to do, we are recognising and reacting to that tipping point.

Oxford Homeowners and their £2.78 billion Debt

The housing and mortgage market has shown a noteworthy resilience. There has been a notable improvement of macro-economic conditions - in July, for example, it was announced that we are witness to the lowest levels of unemployment for nearly 50 years. Furthermore, despite the UK construction industry building 21% more new properties than last year, there has still been a disproportionate increase in demand for housing.  Repossessions too are also at an all-time low at 3,985 for the last Quarter from a high of 29,145 in Q1 2009. All these things have resulted in property values in Oxford being 6.4% higher than a year ago according to the Land Registry.

So, what does all this mean for the homeowners and landlords of Oxford, especially in relation to property prices moving forward?

One vital bellwether of the property market is the mortgage market. The UK mortgage market is worth £961,653,701,493 (that’s £961bn) and is representative of 13,314,512 mortgages (the UK’s mortgage market is the largest in Europe in terms of amount lent per year and the total value of outstanding loans).

Uncertainty causes banks to stop lending – it took a few months throughout the autumn of 2007, before the credit crunch started to hit the Oxford property market, but in late 2007, and for the following year and half, Oxford property values dropped each month causing Oxford property values to drop by 22.9%

Thankfully, after a period of stagnation, the Oxford property market started to recover in 2011 as certainty returned to the economy and Oxford property values really took off in 2013.  Throughout 2016, we saw a return to realistic and stable medium-term property price growth, and now property prices have recovered in Oxford and are now 85.6% higher than they were in 2009.

During the summer of 2017, with the Conservatives having been re-elected on their slender majority, the Oxford property market has experienced some softening, but now appears set to avoid the negative growth experienced in London.  There has been some aggressive competition among mortgage lenders, which has driven mortgage rates down to record lows, which is good news for Oxford homeowners and landlords with the rates on new deals at the lowest they have ever been.  For example, last month, HSBC launched a 1.69% five-year fixed mortgage!

Since 1977, the average Bank of England interest rate has been 6.65%, making the current rates a of 0.25% very low indeed – in fact it is a 323-year record. Thankfully, the proportion of borrowers fixing their mortgage rate has gone from 31.52% in the autumn of 2012 to the current 59.3%. If you haven’t fixed – maybe you should follow the majority?

In the Oxford postcodes of OX1 to OX4 & OX33, if you added up everyone’s mortgage, it would total £2,785,488,264.  If Bank of England rates returned to their trend rate of 6.65% current Oxford borrowers would have to find £178.3m more to just to keep-up their payments

In my opinion, interest rates can only go one way from their 300-year ultra 0.25% low level.  Maybe, just maybe, you might want to consider taking some advice from a qualified mortgage adviser to lock-in the historically low rates.

Agents remain a little pessimistic about the lettings market

Around one fifth of all households in England and 14% of households in Scotland and Wales live in private rented accommodation. Using results from the monthly Royal Institute of Chartered Surveyors survey of agents, above I look at how agents view the current state of the rental market. Much like the sales market, the quarterly (seasonally adjusted) figures from the RICS survey suggest a subdued rental market.

Nationally, agents report a marginal increase in tenant demand over the quarter but at its lowest rate for nearly twenty years. Over the same period, landlord instructions declined, with a net balance of agents reporting a fall in listings. The story was reversed in London where a small net balance of agents reported a rise in listings but a fall in tenant demand. Affordability remains a key pressure on the London market.

Agents expect rental growth to be low over the coming months and in London agents continue to expect rents to fall. Back in October 2016, a net balance of 28% of agents expected average rents to rise over the following quarter but by July 2017 the net balance expecting rental growth in the next quarter was just 10% - the lowest level since mid-2009. For the sixth consecutive month agents across London expect prices to fall, with a net balance of agents across both the South East and Scotland also anticipating decreases.

While agents’ expectations are low for the short term, the outlook improves over the longer term. Nationally rents are expected to rise by just under 2% over the next year, but rise to an average of just over 3% per annum by 2022.

In Oxford, this National picture has been mirrored.  Rent increases at tenancy renewal has been muted and well below the 2 to 3% average growth of recent years.  Demand since April 2017 through to the end of July 2017 has been below the level achieved in the same period last year.  However, August has been strong month, with demand strong and the number of relets returning to the level experienced in 2016.  Overall, the market has become more ‘last minute’ with applicants looking to move in to properties within 4 weeks of making an offer, which is causing some landlords to get rather nervous as it is a change on the more usual 6 to 8 weeks between offer and move-in.

Whilst demand in August has been good, rent increases continue to be subdued.  There are signs that August demand will push in to September, further indicating that prospective tenants have waitd as long as they dare before committing to a new tenancy.

Oxford house prices remain subdued

House price growth in key British cities has fallen from 7.4% in July 2016 to 5.3% but some locations continue to see above average prices rises, the latest index shows.

Oxford prices achieved year on year (YOY) growth of just 1.2% in July, and are marginally down overall over the last quarter (-0.1%).

The biggest annual growth was in Birmingham with a rise of 8%, followed by Manchester up 7.1%, Nottingham up 6.0% and Southampton up 6.5%, according to the data from Hometrack.

In Aberdeen, the market has not recovered from a downturn due to falling oil prices and the city has seen negative growth for two years. Prices are 16% lower than they were in 2014 while year on year they are down 3% and month on month down 0.3%.

In London house price deflation has bottomed out with an increase in the annual rate of growth to 2.8% and month on month growth of 0.9%.  With Oxford increasingly mirroring the capital, albeit with a delay of 6 to 9 months, the slight recovery in London prices is to be welcomed, and may point to Oxford avoiding falling into negative territory YoY.

The index confirms that pressure on prices is greatest in the most expensive parts of London where demand has been weaker since the end of 2014. These inner London markets are registering small year on year price falls of up to 2%. The downward pricing pressure is less evident in the lowest value markets of London which have registered above average growth and price inflation of over 3%.

Looking ahead, the report says that there remains a clear divide between the prospects for house price growth in regional cities, where affordability levels are attractive, and the prospects for house price growth in London and other high value cities in southern England such as Oxford.

‘We expect house price growth in regional cities to be sustained at current levels for the rest of 2017. London is set for a sustained period of low nominal house price growth and lower sales volumes,’ it adds.

Oxford rent rises predicted after brief lull

Rents in Oxford for new tenancies fell by 0.4% in the last 12 months (i.e. not existing tenants experiencing rental increases from their existing landlord). When we compare that current rate with the historical rental inflation in Oxford, an interesting pattern emerges:

·       2016 - Rental Inflation in Oxford was 5.1%

·       2015 - Rental Inflation in Oxford was 9.4%

·       2014 - Rental Inflation in Oxford was 3.2%

The reason behind this change depends on which side of the demand/supply equation you are looking from. On the demand side (from the tenants point of view) there is the uncertainty of Brexit and the fact that salaries are not keeping up with inflation for the first time in three years. Critically, this means tenants have less disposable income to pay their rent. As an aside, it is interesting to note that nationally, rent accounts for 29% of a tenant’s take home pay (Denton House).

On the supply side of the equation (landlords point of view) Brexit also creates uncertainty. However, the biggest issue was a massive upsurge of new rental properties coming on to the market in late 2016, caused by George Osborne’s new 3% stamp duty tax for landlords in the first part of 2016. This meant a lot of new rental properties were ‘dropped’ on to the rental market all at the same time. The greater choice of rental properties for tenants curtailed rental growth/inflation. A slight softening of Oxford property prices has compounded this.  Figures from The Bank of England suggested that first time buyers rose over the last 12 months as some were more inclined to buy instead of rent. Together, these factors played a part in the ongoing moderation of rental growth.

The lead up to the General Election in May didn’t help: after all people don’t like doubt and uncertainty.  Whether it be ‘hard’ or ‘soft’ Brexit negotiations (and with the Election result the Tories might have to be ‘softer’ on those negotiations) the simple fact is, we aren’t building enough properties for us to live in. Both in Oxford, the South East and the wider UK, long-term population trends imply that rents will soon once again be growing faster than inflation again. Look at the projections by the Office of National Statistics.

Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner. As the population grows in Oxford, any restriction to the supply of rental properties (brought about by poor returns for landlords) cannot be in the long-term best interest of tenants. Simply put, rents must go up!  But, with rents already accounting for 29% of a tenants’ disposable income, the ability for most tenants to absorb a rent increase does exist.  It is for this reason, that I believe Government policy which is increasing costs for landlords (removal of mortgage interest rate relief; stamp duty surcharge; and, ban on fees charged to tenants) is short-sighted and poorly considered.

What is happening with Oxford house prices?

In my article last week, I promised to widen the net of my research to see whether there was a noticeable trend in the way house prices around Oxford are currently performing.  The table below summarises the findings of my research, using Rightmove data for houses that sold and were listed over the last 12 months.

The recent reports by the Royal Institution of Chartered Surveyors (RICS) states that the slowdown in the housing market is spreading from London to other parts of SE England.  It also observes that the most expensive homes are particularly likely to have seen cuts in asking price before being sold.  RICS points to a series of changes to tax policy which has particularly impacted buy to let investment, and a continued lack of new-build properties weighing on the market.  Other commentators have pointed to stamp duty discouraging older owner-occupiers from down-sizing as another drag on house availability.

Looking at Oxford specifically, there is evidence that the most expensive parts of Oxford are under-performing.  The notable exception being Cumnor, where some new build and strong activity have impacted the overall trend for that part of town. Whilst overall, there is a stronger trend of house price growth in the parts of Oxford which are below City average values, it is a very mixed picture.  Headington, Blackbird Leys and Greater Leys have out-performed the City average whilst Wolvercote, Marston and Cowley are close to the overall average, with Botley and Barton performing particularly poorly when compared to the prior 12-month period.

Of course, when looking at data like this it is important to consider the local factors that could have affected housing prices.  For example, Wolvercote has recovered from a negative position 12 months ago, reflecting the completion of road works that had previously dragged on prices.  Barton, may well be experiencing some drag due to the new houses coming on stream, causing people to delay their move waiting for the new stock to come on stream, or avoiding the area due to the works.

Overall, there is some evidence that it will be the top-end of the property market in Oxford that will feel the pinch earliest.  And, as I have commented over the last several months, Oxford is experiencing a 19% reduction in house sale transactions, and continues to suffer from an under-supply of new build homes.  There are some vendors who are also disregarding the price sensitivity in the market, holding-out for unrealistic offers, in a market that has become far more price sensitive.

Across these parts of Oxford the average increase inhouse prices over the last 7 years is 14.9% which rises to 18% if Boars Hill is removed from the calculation.  Oxford as a whole has averaged 20% increases since 2014.

In summary, it is far too soon to panic, but vendors need to be realistic with the price they offer making sure they benchmark well with comparable properties on the market.

Oxford is a favourite place for people moving out of London

The number of people leaving the capital has reached a 5-year high, with net departures to homes elsewhere in the UK reaching 93,300 people in the year to June 2016 – an increase of more than 80% on five years previously according to the ONS.

Apart from people in their 20’s there is a net outflow across all age groups with thirty-somethings being most likely to look for somewhere more affordable to buy a family home.

Those who live in the Capital’s richest boroughs are more likely to move to more affluent areas.  People in Kensington and Chelsea tending to move to Cambridge; Westminster residents heading to Oxford and those in Hammersmith and Fulham moving to Elmbridge in Surrey.  Other popular places for relocation include St Albans and Slough.

It is perhaps no surprise that the popular new places remain within communing reach of London, and have vibrant community, social and cultural attractions.  As I have predicted in this blog, these people are looking for family homes or 3 beds or more, ease of access to train and road links to London, and proximity to open spaces, supermarkets and social venues. I expect to see these properties to increase in popularity for both buyers and renters over the coming 2 or 3 years.

Oxford is one of 13 UK cities experiencing lower growth in house prices than a year ago according to Hometrack

13 cities have a lower annual growth rate than a year ago with London, Bristol and Oxford recording the greatest slowdown as affordability and political uncertainty impact demand.

The average prices of a house in the UK’s largest cities increased by 5.1% in the 12 months to June 2017, but growth in London slowed to 2.6%, the lowest rate for over five years.

The annual growth is down from the 8.8% recorded in June last year although it is still robust in larger northern cities such as Birmingham, Manchester and Edinburgh, according to the figures from the latest Hometrack cities house price index.

Growth in the first half of 2017 ranged from 0.2% in Aberdeen to 6.1% in Birmingham and while price growth is higher in seven cities, the scale of the increases compared to June 2016 are more modest.

Prices in Cambridge were up just 1.9%, in Oxford by 2.1%, in Newcastle by 2.4% and in Aberdeen were down 2.7%.

Sustained house price growth in large regional cities has pushed house prices ahead of their 2007 peak in 16 of the 20 cities covered by the index.

Looking ahead to the second half of 2017 the report suggests that even with a material slowdown in the rate of house price growth across south eastern England, house price inflation is holding up despite the squeeze on real incomes and uncertainty around Brexit.

At the end of 2016 Hometrack predicted that city house price growth over 2017 would be 4% but on current trends the firm now expects this to be closer to 6% or 7%. ‘There remains material upside for house prices outside south-eastern England.

Cities such as Bristol, Oxford and Cambridge are seeing slower growth but this is probably due to prices having risen strongly over the last decade, widening the gap with average earnings and impacting affordability for many people.  Major University towns are also braced for reduced demand from foreign nationals for places in their institutions.

It is worth pointing out for readers’ clarity that the headlines sometimes mask the fact that it is a reduction in GROWTH as opposed to an absolute reduction in house values.  At 2.1% Oxford house prices struggled to keep pace with inflation, but continued to grow ahead of earnings, exacerbating the affordability gap for many people, forcing many to live outside of the City commuting in daily by car, train and bus.

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.