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.

Average Rents in Oxford set to rise

Back in the Spring of 2016, there was a surge in Oxford landlords buying buy to let property in Oxford as they tried to beat George Osborne’s new stamp duty changes which kicked in on the 1^st April 2016. Below are the property statistics for sales either side of the deadline in OX2:

Jan 2016       –  42 properties sold

Feb 2016      –  27 properties sold

March 2016  –  91 properties sold

April 2016     –  19 properties sold

May 2016      –  23 properties sold

Normally, the number of sales in the Spring months is very similar, irrespective of the month. This shows that Government policy does affect behaviour in the housing market.

During 2016 Oxford rents rose steadily is not likely to inverse any time soon, particularly as Government legislation planned for 2017 might reduce rental stock and push property values ever upward. The decline of buy to let mortgage interest tax relief will make some buy to let properties lossmaking, forcing landlords to pass on costs to tenants in the form of higher rents just to stay afloat. Even those who can still operate may be deterred from making further investments, reducing growth in rental stock at a time of severe shortage in Oxford.

But it’s not all bad news for tenants. Whilst average rents in Oxford since 2005 have increased by 22.6%, inflation has been 38.5% over the same time frame, meaning Oxford tenants are 15.9% better off in real terms when it comes to their rent (which is a sizeable chunk of most people’s monthly household budgets).  However according to Dataloft, Oxford remains the least affordable place to rent outside of London with average rents approaching 50% of average household income (assuming household income is 1.5 times Oxford’s average earnings).

Year	Average Rent in Oxford per month
2005	2030
2006	2077
2007	2123
2008	2193
2009	2227
2010	2196
2011	2249
2012	2300
2013	2334
2014	2369
2015	2421
2016	2490

However, looking at the rent rises over the last five years in Oxford following the Credit crunch (2011), rents in Oxford have risen by an average of just 2.4% a year way below the c6% per annum increases in house prices experienced over the same period of time.

The view I am trying to portray is that while renting is often portrayed as the unfavourable alternative to home ownership, many young Oxford professionals like renting as it gives them adaptability with their life. But, as can be seen from the statistics, tenants have also had a good deal with below inflation increases in rents debunking the myth that landlords have profited from hiking rents above either inflation or the increases in costs in house ownership.  In reality, landlords have been prudent and cautious recognizing that their tenants have been living through an economic downturn.

However, there is a tightrope for landlords to walk balancing the preservation of stable income from known tenants vs. increasing rents above the long-term trend to re-balance their returns.

The UK buy to let sector reflects our experience in Oxford’s property market

The latest research from Connells Survey and Valuation has found that, during August, activity in the buy-to-let sector saw a surge of 12.7%.

Encouraging economic data, high levels of employment and fading fears of a recession appear to have injected life into the sector. August’s surge in activity highlights the resilience of the the buy-to-let sector, albeit we can still see the impact of the Government’s poorly considered BTL legislation.

According to Connells, first-time buyer activity saw the strongest overall increase in valuations and has driven August’s housing market, with valuations up by 6.8% on July and by 19.6% on an annual basis.

Remortgaging activity has also seen an increase in valuations on both a monthly and an annual basis. On a monthly basis, remortgaging valuations saw a growth of 4.2% and a 1.5% increase year on year to August 2016.

Across all sectors of the housing market, overall valuation activity has risen by 5.1% on a monthly basis, between July and August. On an annual basis, there was also a slight increase of 0.2% more valuations carried out than in August 2015.

Overall market activity remains steady and fears of a post-Brexit slump has failed to emerge. In the first full month after the Bank of England’s decision to cut interest rates, the buy-to-let market has seen a surge in activity. Powered by revised low interest rate deals announced by major mortgage lenders, landlords have taken the opportunity to remortgage and/or acquire new properties.

Is Oxford Over Crowded?

Oxford is in the clutches of a population crisis that has now started to affect the quality of life of those living in Oxford. There are simply not enough homes in Oxford to house the growing numbers of people who want to live in the city. The burden on public services is approaching a breaking point with many parents unable to send their child to their first choice of primary or secondary school and the chances of getting a decent Dentist or GP Doctor Surgery next to nil.

That’s what the papers would say anyway! But I’ve taken a look at real numbers, and in particular I’ve looked at the housing issue in Oxford. To start with, the UK has roughly 1,065 people per square mile – the second highest in Europe. The total area of Oxford itself is 12.621 square miles and there are 159,900 Oxford residents, meaning 12,669 people live in each square mile of Oxford, or 11,600 more than the national average…so it’s no wonder we appear to be bursting at the seams!

But, we all know that newspapers, politicians and property market bloggers quote big numbers to sell more newspapers, get elected or get people to read their blog (I recognise the irony!). A square mile is enormous and much bigger than is sounds, so the numbers look correspondingly large (and headline grabbing). Most people reading this will know what an ‘acre’ is, but those younger readers who don’t, it is an imperial unit of measurement for land and it is approximately 63 square metres.

In Oxford, fractionally more than 18 people live in every acre of Oxford, not as headline grabbing, but a lot more relative to everyday life, and if I am being honest, a figure that doesn’t seem that bad.

However, the issue at hand is, we need more homes to be built. In 2007, Tony Blair set a target that 240,000 homes a year needed to be built to keep up with the population growth, whilst the Tory’s new target since 2010 was a more modest 200,000 a year. However, since 2010, as a country, we have only been building between 140,000 and 150,000 homes a year. So where are we going to build them? Because we have no space! Or do we?

Well, let me tell you this fascinating piece of information - I found out recently in an official Government report that in England (which is the most densely populated country of the Union), the 20 million English homes cover only 1.1% of its land mass. That is not a typo, only one point one per cent (1.1%) of land in England is covered by residential property. In more detail, of all the land in England:

·       Residential Houses and Flats 1.1% 

·       Gardens 4.3%

·       Shops and Offices 0.7%

·       Highways (Roads and Paths) 2.3%

·       Railways 0.1%

·       Water (Rivers /Reservoirs) 2.6%

·       Industry, Military and other uses 1.4%

Which leaves 87.5% which is Open Countryside (and if you think about it, add to that the gardens, which are green spaces, and the country is 92.8% greenspace)

As a country, we have plenty of space to build more homes for the younger generation and the five million more homes needed in the next 20 years would use only around 0.25% of the country’s land. Now I am not advocating building massive housing estates and 20 storey concrete and glass apartment blocks next to local beauty spots such as Blenheim Palace or Christ Church Meadow, but with some clever planning and joined up thinking, we really do need to think outside the box when it comes to how we are going to build and house our children and our children’s children over the coming 50 years in Oxford. This should be of concern to owner occupiers and landlords alike, Oxford needs up to 32,000 more homes to buy and to rent to keep up with population growth.  Today, average house prices are 16.2 times average earnings, amongst the highest once London is excluded and growing.  If anyone has their own ideas or opinions, I would love to hear from you.

In the meantime, if you would like to read other articles about Oxford Property Market, please visit the Oxford Property Market Blog www.oxfordpropertyblog.co.uk

Guess what proportion of Oxford properties have 3 or more bedrooms?

An orthodox way of classifying property in the UK is to look at the number of bedrooms rather than its size in square metres (although now we are leaving the EU – I wonder if we can go back to feet and inches?). It seems that both homeowners and tenants are happy to pay for more space. And, typically, the more bedrooms a house or apartment has, the bigger it is likely to be, because typically properties with more bedrooms tend to have larger or more reception (living) rooms. However, if you think about it, this isn’t so astonishing given that properties with more bedrooms would typically accommodate more people and therefore require larger reception rooms. 

In today’s Oxford property market, the Oxford homeowners and Oxford landlords I talk to are always asking me which attributes and features are likely to make their property comparatively more attractive and which ones may detract from the price. Over time, buyers’ and tenants’ wants and needs have changed. In Oxford, location is still the No. 1 factor affecting the value of property, and a property in the best neighbourhoods, say Botley, Jericho or Summertown or those with proximity to a great school or major place of work can command a price 40 to 50% higher than a similar house in an ‘average’ area. However, after location, the next characteristic that has the most significant influence on the desirability, and thus price, of property is the number of bedrooms and the type (i.e. Detached/ Semi/Terraced/Flat).

In previous articles, I have analysed the Oxford housing stock into bedrooms and type of property, but never before now have I cross-referenced type against bedrooms. These figures for the Oxford City Council area make fascinating reading. It shows 76.2% of all properties in the area have 3 or more bedrooms.

I was genuinely surprised at the low numbers of one and two bed properties, especially 2 bed semis detached houses, especially as tenants like smaller one and two bed properties in Oxford. You see, it might interest the homeowners and landlords of Oxford, that there has been a change in the numbers of properties on the market and the split in bedrooms on the market over the last 12 months.

For several years Oxford buy-to-let investors have been pretty much only buyers at the lower end (starter homes) of the market, enticed by high tenant demand and attractive returns. Some Oxford landlords believe their window of opportunity has started to close with the new tax regime for landlords, whilst it already appears to be opening wider for first-time buyers. This is great news for first time buyers who can scrape together the sizable deposit needed to get in to the Oxford property market.  One final note for Oxford landlords - all is not lost - you can still pick up bargains if you are prepared to buy a property in need of work, you just need to be a increasingly savvy and do your homework to ensure the project costs plus the purchase price will allow a decent yield.  One source of such information with articles like this is the Oxford Property Blog www.OxfordPropertyBlog.co.uk