The Renter’s Reform Bill Is Too Much Too Late

Oxford’s private rented sector (PRS) is suffering from an under-supply of properties, together with high inflation this is driving-up rents with tenants bidding against each other to secure the best properties.  This under-supply has been apparent for at least three years, albeit temporarily hidden by the pandemic lockdowns.

The government asserts that it’s white paper which was published this week, will improve the market, making  life easier and fairer for tenants.  It is my belief that they are too late and the effect of these proposals will be to further worsen the supply crisis of good quality rental properties owned by decent caring landlords across Oxford.

For example, Section 21 of the Housing Act 1988 introduced legislation specifically designed to ease a supply crisis in the private rented sector.  The Section 21 Notice served to give landlords confidence to invest in new properties as it introduced balance to the legal rights of tenants and landlords and gave confidence to providers of buy to let mortgages.

Over recent years lobby groups have ensured that the Section 21 Notice is referred to as a ‘no fault eviction’ and portrayed it as a tool used by unscrupulous landlords to throw tenants out on the street for no reason other than malice.  In reality, both parties are protected by a fixed-term contract which can be for any period up to 3 years in length. 

The white paper includes provisions to abolish the Section 21 legislation right in the middle of a supply crisis as significant as that experienced in the 1980’s.  It seems to me that axing legislation introduced to ease a supply-crisis in the middle of a supply crisis is not sensible.

But, the white paper goes further, enabling a tenant to end a tenancy at any time with just 2-months’ notice, but restricting landlords to narrow legally-defined reasons for termination.  I have always been taught that good legislation is balanced legislation – the principle of reciprocal rights is embedded into every good contract.  The white paper favours one group over another, with some commentators suggesting the imbalance is so marked, that it amounts to discrimination.

What many commentators are missing is the separate Minimum Energy Efficiency Standards legislation which is running in parallel to the new White Paper.  Whilst details and dates remain vague, it is expected that by 2025 PRS properties will have to have a minimum EPC rating of C (currently a minimum of E is required).  Where a property is incapable of achieving a C-rating, landlords are expected to be required to invest a minimum of £10,000 on improving the energy efficiency of their property before they will be considered for an exemption.  In Oxford, that is roughly two-thirds of annual rent in many other parts of the UK it will be a multiple of annual rent.

The legislative burden on landlords is now too great for many and landlords are selling-up.  The white paper together with MEES legislation will accelerate the sale of rental properties, worsening an already acute supply constraint. 

The government is going too far too late and it has failed to adequately consider the wider  consequences of its populist policy paper.  

Three inflation-beating actions Oxford Landlords should take now

 

Inflation is already at 6.2% and many economists are forecasting levels above 10% for as long as the next 2 years.  Important lessons can be drawn from history, and Oxford landlords should take the following action without delay:

• 1.       Those with a buy to let mortgage should re-finance to secure a fixed-rate multi-year loan.  The Bank of England Base Rate interest Rate is forecast to rise to at least 1.5%, double the current level.  Securing a fixed rate loan now will protect landlords from rising borrowing costs;
• 2.       Hold-on to your properties and invest to improve energy efficiency.  In times of inflation, savings typically lose real value, borrowings including mortgages reduce in real terms and assets like houses increase in value and offer stable investment returns;
• 3.       Actively review rents at least annually to keep pace with inflation to avoid earnings reducing in real terms;

Oxford's landlords are hit daily by overwhelmingly negative press narrative, but having weathered uncertainty during Brexit and the hardships of lockdown, landlords have weathered the storm and are now better-placed than most for an economy dominated by inflation.

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.

Should I stay or should I go now?

Should I stay or should I go now? The question immortalised by Joe Strummer of The Clash in the 1980’s is a question on many Oxford landlords’ lips.  Or more specifically, should I sell my properties, or should I keep them?

It is unquestionably that Government policy has been hostile to landlords over the last 5 years.  The removal of tax relief for mortgage interest payments, the ban on fees charged to tenants, the planned repeal of Section 21 notices and most recently the virtual elimination of eviction of tenants with persistent rent arrears have all hit landlords hard.  And, now we hear of plans to increase capital gains tax is widely reported. 

This fiscal bashing meted out to UK landlords was already causing many to wonder whether their participation in the private rented sector (PRS) is worthwhile, and now Oxford City Council plans to further increase costs for Oxford’s landlords by introducing mandatory licencing for all rental homes.

Should Oxford landlords stay or should they go now?

The fundamentals of the Oxford property market remain positive for current landlords.  Stubbornly high property prices mean it can be a more marginal decision for new landlords.

Property dedicated to students – houses in multiple occupation where groups of students live together is feeling the effects of c2000 new rooms brought online by the universities, colleges, and specialist providers.  But, lockdown has shown to students the benefits of living off-campus where they can live independently, and we are seeing no material reduction in demand for student homes for the 2021/22 academic year.

Central Oxford apartments have felt the effect of reduced numbers of foreign national students, and it has taken a while to re-focus to alternative domestic demand.  Whilst rents in central Oxford have not yet fully recovered, decent rental yields continue to be available for the best-presented properties which continue to let reliably.

Lockdown has caused rising unemployment and under-employment particularly in the hospitality and retail sectors.  Tenants are waiting until the last minute before they commit to new tenancies with many new tenancies being with 1 month of the date of move-in (compared to 6 to 8 weeks in 2019). Rent arrears are more widespread than the long-term trend, but to date, Oxford has performed well compared to most UK cities. 

The most encouraging news, however, comes from Rightmove, which positions Oxford as the third-placed UK city for an increase in rental searches over the last 12 months up by 64% compared to 2019 with just Cambridge and Cirencester showing a greater increase (76% and 75% respectively).  This evidence supports my view that Oxford’s economy is showing strong resilience and continues to be a great place to live, work and study.

Economists are split – some point to future inflation and others to stagnation.  Property and rental income offer security in uncertain times.

Historically rental income and property values rise in response to inflation protecting income and invested capital.  At best, stock markets are expected to be volatile and unpredictable, at worst they are predicted to stagnate in the face of huge sovereign debt worldwide.  If, inflation does not take hold, interest rates on savings seem certain to stagnate at record low levels and stock markets will enter bear territory.  Both scenarios are bad news for savings and alternative investments.

So, ‘Should Oxford’s landlords stay or should they go now?’  

In my opinion, unequivocally, THEY SHOULD STAY.  Landlords’ property assets will see them through the uncertainty of the next 5 years, providing effective investment returns whether inflation or stagnation take hold. 

Is The Government Discriminating Against Landlords

This afternoon's U-turn by the Government that stops the eviction of tenants with rent arrears risks the accusation that the Government is discriminating against a minority group, namely landlords.

Press narrative paints landlords as a rogue group intent on driving down the standards of accommodation whilst profiting wildly off the backs of their tenants. But, it seems to me that landlords are not as they are painted.  

Many landlords can't afford to live if their rental income is not paid; others rely on rental income to supplement their otherwise meagre retirement pension and still more have a single investment property as part of their future retirement plans.  The vast majority provide high-quality homes for their tenants, and have seen the income from their buy to let properties reduce over recent years as legislation has driven-up costs.

Why is it that Government believes tenants should be helped at the direct expense of landlords?  Is that not the essence of discrimination?  Do Landlords not themselves have rights? Do they not deserve equal treatment? Equal protection?

The cynic would point to the fact that 5.4m people rent their home, out numbering landlords by over 2:1.  That's twice the voting power and therefore twice the incentive for them to be supported.

Of course a very small minority of landlords are rogues, but the majority are not, and they should not be characterised as such.  

As the Covid unemployment crisis takes hold, demand for private rented homes will increase.  With many landlords being forced to sell, I predict a severe shortage of quality private rental homes over the coming 12 to 18 months in parts of the country. Will the Government  look back and blame their own policies or instead impose rent controls, further punishing those landlords who have resisted the temptation to leave the sector?

History shows that Government intervention in the private housing market doesn't work.  It distorts the market and eventually leads to legislative roll-back but only after the crisis has been created.

The landlords I know are law abiding, tax paying, ordinary people who invest in their properties providing high quality homes for their tenants.  They deserve support through this crisis as much as any other group - no more, no less. 

Oxford’s landlords need to act now to protect their future income.

Recent research by The Resolution Foundation indicates that a third of 18 to 24-year-olds are earning less today than they were before the Covid-19 crisis.  Further research by Flatfair shows that across the UK half of tenants are aged 16 to 34 and young workers are expected to be disproportionately impacted by rising unemployment as government support is wound down.  To illustrate this further, close to half of the 2.8m retail workers are aged 16 to 34 and six in 10 working in food and beverage outlets are of the same demographic.


Significant demand for Oxford buy to let homes is drawn from 16 to 34 year olds, for example those visiting the City for under-graduate and post-graduate studies, undertaking research projects and young adults drawn to live and work in the City but for whom home ownership is an unaffordable dream.


As the job retention scheme requires contributions to employee wage costs by employers from August, many commentators are predicting a return to 10% unemployment - a level not seen since the 1970’s.  Whilst we all hope that the worst predictions are not realised, it seems certain that many current Oxford tenants will suffer financially due to reduced working hours or because of unemployment.  


At the same time it now seems certain that Section 21 notices will be repealed denying landlord’s access to an accelerated eviction process, with some commentators believing that the current 3-month notice period will become the norm.  This will force landlords to rely on the Section 8 notice for re-possession which is both slower and more bureaucratic during normal times and is expected to take several months once Housing Courts re-open and work through the current backlog of cases.   Should unemployment spike as predicted, there will be growing pressure on government to protect tenants from eviction for longer, which seems certain to force landlords to cope with prolonged periods of reduced or zero rental income.


It has become a cross-party political norm to disregard the interests of landlords, and instead favour tenant protections.  There are after all far more votes cast by tenants than there are by landlords!  This means that Oxford’s landlords should act now to protect their financial interests by committing to rent protection or rent guarantee insurance for each of their tenancies.  Whilst these policies are not cheap, the income protection that they offer and the legal and eviction support that is embedded will prove to be invaluable over the coming months and years for those landlords whose tenants fail to pay their rent.


Savvy landlords will recognise that their property assets will be a stable and secure safe-haven during the economic uncertainty to come.  Mitigating the risk of exposure to tenant financial difficulties is a sensible strategy to protect and secure rental income as unemployment rises.

What is the outlook for Oxford property?

Many Oxford landlords are asking my view of the property market outlook, and to be totally honest, I think I and other commentators are largely guessing as there is no historic precedent from which to draw lessons learned.  To summarise my view, I’d say that the longer the current lockdown continues the greater the negative impact will be on the economy as a whole and on Oxford’s housing market.

Oxford has a diverse local economy combining: knowledge-based services e.g. research, academia and publishing; Medical sciences; a large public sector; and production industries and specialist engineering.  The City’s economy has proven itself to be resilient in the past, and I expect it to escape the worst economic impacts of Covid-19.

Increasingly, it seems to me that the housing market can rebound quickly in Oxford if the city avoids a significant increase in unemployment which will undermine housing markets in other regions.

I expect academic and medical ‘tourism’ to re-establish quickly as delayed courses, placements and research programmes are re-scheduled.  This will create positive momentum in the lettings sector.  House sales seem likely to remain subdued for several months while buyers and sellers regain confidence about their income and ability to afford increased mortgage repayments.  


If the UK economy avoids a spike in general inflation, rents will be impacted by void properties that failed to find tenants during the lockdown and early post-lockdown period, and as a result, I expect rent increases to remain subdued for 12 months.

If, however, inflation takes hold in the UK economy, investment in housing and other assets will increase as investors and owner-occupiers seek to protect the value of their savings. If Oxford avoids a large increase in local unemployment and if inflationary pressures build, I believe the local property market will bounce back more quickly.  Conversely, if local unemployment is higher and the UK experiences deflationary pressures, the market will take much longer to recover.

Section 21 Accelerated Repossession will be scrapped

The new government's Queen's Speech included the scrapping of Section 21 Notices which give Oxford landlords access to a mandatory and accelerated process for achieving vacant possession through the courts.

Instead Oxford landlords will be forced to rely on the longer-winded Section 8 Notice which includes greater discretion for the courts, albeit with some mandatory criteria defined.  This author worries that without reform of the courts and the creation of a dedicated Housing Court, the already congested courts will not be able to cope, causing landlords greater losses and much longer periods before they can regain possession of their property.

The Section 8 process is well-established and broadly fit for purpose provided that landlords can secure early court dates.  Costs of Section 8 are typically higher, and landlords have to represent themselves or hire a solicitor, which further increases their costs.

Unfortunately Section 21 Notices which have come to referred to as 'no fault evictions' has been abused by a few rogue landlords, and those few bad apples have ensured that the vast majority of landlords who have used the process correctly now have to pay the price.  The worst hot spots for abuse of Section 21 are Manchester, St Helens, Liverpool, Birkenhead, The London boroughs of Croydon and Central London, followed by Stratford, Bromley, Clerkenwell and Shoreditch make up the top 10.

Boris this is what Oxford Landlords would like for Christmas

Oxford landlords have been selling more of their properties than investing in new properties, despite Oxford being identified as THE top UK City for buy to rent investment returns.  With demand from Oxford tenants continuing to rise year on year, and supply of good quality private rented homes failing to keep up with demand, it seems certain that rental yields will outstrip inflation over the coming 3 years.  So why are landlords divesting?

It is the cumulative impact of legislative changes enacted by the government - a stamp duty surcharge, taxing new buy to let investments, the reduction of tax relief on mortgage interest and most recently, the tenant fee ban which has made agency more expensive.

However, whilst these changes have undermined investment returns, most landlords are still making strong returns overall.  But, Oxford's landlords are being made to feel the 'bad guys' by a political and media narrative that casts them as the bad guys and their tenants as an exploited minority.  The truth across Oxford is that the vast majority of landlords provide good quality and value reliable tenants.

The new government needs to stop interfering with the private rented market, and needs to take some specific actions to re-invigorate landlord investment if they are to avoid worsening an already serious local housing crisis.  So what do Oxford landlords want for Christmas from Boris?

Stamp duty reform
The government should repeal the stamp duty surcharge on buy to let purchases, to remove this barrier to new investment in private rented properties.

Reform not scrap Section 21 Notices
The proposed changes that will remove the Section 21 Notice forcing landlords to rely on Section 8 notices is short-sighted and punishes all landlords for the failings of a tiny minority of rogue landlords.  Instead the accelerated prepossession should be retained, but better enforced with clarification to offer tenants better protection from non-fault eviction.

House building blitz
Oxford has suffered over the last decade from a dearth of new affordable housing being built to offer a true alternative to renting for some tenants.  This is now THE biggest challenge facing local government and Parliament, without new affordable housing stock coming on stream, house ownership will remain a pipe-dream for many of the City's residents.  Until then, the city will remain reliant of a robust and vibrant private rented sector.

The jury is out on whether the election result will be positive for Oxford's landlords or merely the least-bad outcome.  But all are united in hoping that government will take time to properly consider the big picture and listen carefully to the industry experts so as to avoid negative consequences that have resulted from interference in 2019.

Oxford Landlord Rents to Rise

The Royal Institution of Chartered Surveyors (RICS) reports a fall in the stock of rental properties in the UK, and says this has now been a trend over the last three years. 

29 per cent of contributors report a fall in landlord instructions in November.  Over the same period, tenant demand remained steady at the national level. RICS expects rents to rise over the coming quarter. 

Letting agents consulted by the RICS have indicated a forecast of rent rises equivalent to two per cent over the coming 12 months. 

Over the longer five-year horizon, rental growth projections stand at more than three per cent per annum - this is outstripping sale prices which are seen rising by around 2.5 per cent annually.

This trend of sustained high demand from tenants and reducing supply resulting from landlords reacting to hostile government policy in the areas of tax relief, stamp duty and the ban on fee charged to tenants.  If, this anti-landlord focus continues, this author predicts a perfect-storm for people who rely on the private rented sector.

These pressures are particularly acute in Oxford, where high house prices mean that 28% of the population depends on good quality rented homes.  The tragedy is that as rents rise above inflation and above house prices, the investment returns should be attracting new landlords to invest, but to date this has not reversed the landlord exodus.

Our next government needs to think very hard before they intervene further in this fragile market, as they risk creating a rental housing crisis to sit alongside the housebuilding crisis, which is already an acute pressure in Oxford’s housing market.

Oxford best city for buy-to-let investment

Aldermore the bank has published a report looking at the best Cities in the UK for buy to let investors and Oxford is confirmed the best city for landlords in the UK.

The city emerged top of the 25 analysed in the bank’s Buy to Let City Tracker.  Manchester, Edinburgh, London and Norwich respectively joined Oxford to make up the top 5

Oxford’s advantage for private landlords was that it has one of the largest private sector rental markets in the UK, with 28 per cent of all residents renting privately.

Average property prices have grown at 4.8 per cent a year over the past decade, the city’s average monthly rent for a room was £596, and it has low levels of void when compared to other Cities.

Five measures of buy-to-let investment desirability were assessed: Average total rent;  Best short-term returns through rental yield; Long-term return through house price growth over the past decade: Lowest number of vacancies as a proportion of total housing stock; and, the percentage of the City’s population renting.

Derby, Sheffield, Bradford, Newcastle and Wolverhampton were the lowest ranked Cities in the report.

The Aldermore report confirms feedback that I have given to Oxford landlords over the last few years, that their long-term investment returns are strong particularly after 5 years of property ownership.  Whilst property values have rather stagnated over the last several years in Oxford, the long-term returns remain robust and compare favourably with alternative investments.

However, with planning approvals and new build supply failing to improve, it seems likely that the proportion of Oxford residents renting will only rise further.  This seems certain to put upward pressure on rents, improving landlord returns, but not helping first time buyers to move into their first home.  With Government policy dissuading landlords from buying new properties, I believe Oxford is heading for supply constraint for good quality private rented properties.  Landlords with available funds would be well-advised to invest further to benefit from this supply constraint.

Known new legislation in 2020 for Oxford's landlords

With 10 days to go until the General Election all eyes are on which party will form the next Government, it is easy to lose sight of the new legislation what is already due to become law in 2020.  The top 4 known changes that Oxford landlords need to focus on for 2020 are:

1) Minimum energy efficiency standards (MEES)

The minimum energy efficiency standards (MEES) came into effect in April 2018, stated that new tenancy agreements and renewals (other than some HMOs such as bedsits) must have an energy performance certificate (EPC) rating of E or above.

By April 1, 2020, however, the regulations will be extended to also cover existing tenancies. This means that, under the new legislation, properties with an energy performance certificate (EPC) rating of F or G will be classed as unrentable from that date on.

It is worth noting that there are already whispers that these standards could rise again in another couple of years, at which point ‘D’ will be the minimum EPC rating, so it’s worth getting your properties up to scratch now to prevent even more work later.

2) Electrical installation checks

Last January, the Ministry of Housing, Communities and Local Government (MHCLG) announced that mandatory five-year electrical installation checks on private rented housing in England would be introduced over a transitional period of two years. The implementation date has not yet been clarified so, it is still unconfirmed as to exactly when this will begin.  This author believes that it is likely that the legislation will be introduced  in 2020.

3) New tax relief rules

In 2015, the government made property rentals a much less viable option for many when they announced that Mortgage Interest Rate Relief was to be phased out.

From April 2020, Oxford's landlords will receive a 20% tax credit on their interest payments; not great news for those in the higher tax bracket – which could catch more landlords as they now have to declare the rental income that they previously used for interest payments.

Many landlords are now setting up limited companies when buying new rental properties in order to avoid the higher individual rates.

4) Changes to Private Residence Relief

From April 2020, changes to Private Residence Relief will result in Oxford landlords losing nine months’ worth of Capital Gains tax relief when they come to sell.

Currently landlords can claim Private Residence Relief for all the time they lived in their property before letting it to tenants, plus an extra 18 months after moving out, which will be reduced next April to the time they lived in their property plus just nine months post-moving out.

Landlords who rent out a property that was once their main home will lose the £40,000 worth of lettings relief they currently enjoy scrapped rom April onwards. Landlords who share an occupancy with their tenants will still be able to claim. And, the deadline for payment of  Capital Gains Tax  will be reduced to within 30 days of the completion of the sale.

It seems almost certain also that during 2020 Section 21 Notices that allow landlords to access an accelerated process to regain vacant possession of their properties will be abolished.  Whilst Section 8 Notices will still be available to landlords, there is widespread concern about the long-winded process to get a confirmed court date, and the fact that many Section 8 criteria allow for court discretion.

Whichever party wins the 2019 General Election, the private rental sector will continue to experience reform.  Cynics would claim that is merely a reflection of the parties trying to ingratiate themselves with the millions of tenants who rely on private rented accommodation.  However, I regard that as over-simplistic.  Some reform that seeks to professionalise the sector and improve the quality of accommodation is to be welcomed.  Where Government intervention is less welcome is in factors that seek to artificially impact the functioning of the market, and which appear to seek to punish residential landlords.  Such measures risk undermining the supply of good quality private rented homes at the very time when peak demand is being reached.

If Oxford's landlords are forced to sell their properties due to unviable financial returns, then rents will rise further as the supply of good quality rented homes reduces.

Oxford house affordability improving, but slowly

In Oxford, the average home now costs £405,600 according to Zoopla, which is 11.9 times the average single person income of £33,900.  With Oxford house prices static in Oxford according to Zoopla, average wages are now outstripping house prices.

This still places Oxford as the 3rd least affordable City in the UK behind London (13.1 times average income) and Cambridge (12.2 times average income).

So why is Oxford property so expensive?  Some factors are shared by Cambridge - it's a World famous centre of learning, with beautiful historic architecture and positioned well for commuting to/from London and for accessing Cotswold chocolate box villages and countryside at weekends.

But that's not what's driving the high cost of Oxford homes.  The real cause of high house prices is the lack of new starter homes and down-sizer homes being built.  Just 2% of housing is new build, and most new build relates to larger 3, 4 and 5 bed properties targeting affluent families.

Too many Oxford retirees are living in homes that are too large for them because there are no suitable properties for them to down-size into.  At the other end of the scale starter homes are virtually non-existent, forcing many affluent young professionals to rent homes for longer than is necessary.

I am asked daily by Oxford prospective home buyers 'will prices crash with Brexit?'.  My current response is there could be a short-term dip, but I can't see how prices will crash.  Demand for homes in Oxford is high, and sellers expectations of value are also high.  Most sellers will stay put rather than sell at a low price, and if demand surges there will be lower supply and higher demand.

And, the fundamentals will be the same - too few starter homes, too few down-sizer homes and new supply languishing at the low single digit percentage of supply.

Oxford homes owners and landlords may need to weather some 'headwinds' but their assets remain valuable over the medium to long-term.

Fewer Oford homes are finding buyers below asking price and after longer on the market

The Oxford housing market is struggling-on despite the daily gloom-laden newspaper headlines.  But, many sellers are failing to find a buyer.  Why is that?

The number of completed house sales is down 8% over the last 12 months and this is the second year in succession that the total number of houses sold has fallen.  1.909 properties sold in Oxford over the last 12 months.  Are there fewer buyers? Or are buyers waiting to see if Brexit results in a price crash enabling them to buy more with less?

Normally when supply outstrips demand prices fall.  But, over the last 12 months Oxford prices are reported as being 1% higher than 1 year ago.  Not the spectacular rises Oxford homeowners have come to expect, but not the falling values experienced in London.

So Oxford asking prices have held-up well, and Oxford has resisted negative house prices.  So where is the 'but'?  Well it is pretty hard to find, but I have done some digging and spent a little time researching Land Registry data.  When a house sells and the new buyers register their purchase the Land Registry data is updated confirming the agreed price at which the property sold.  It makes interesting reading.

On average Oxford homes are selling around 3.7% below their asking price.  But, there is a quite wide variation depending on postcode.  The best performing is OX4 with sold properties completing c 2.4% below average asking price, and the worst performing is OX5 with completed sales 4.8% below average asking price.  OX2 is discounted around 3.2%; OX3 3.7% and Ox1 3.8% respectively.

On average across Oxford achieved sales price is £15,600 below asking price with the spread from c£17,600 in OX5 to c£9,000 in OX4.

So the message is clear, whilst asking prices are holding firm, the Oxford home owners who are selling successfully are open to negotiation with the buyer.  With average time on market exceeding 17 weeks, it pays to be savvy!

The question I am asked most frequently is 'Bill, what will happen to Oxford house prices after Brexit?'  To which the only valid answer is 'I don't have a crystal ball!'  But, the fundamental drivers of Oxford's high house prices will not be altered by Brexit - there are virtually no new affordable homes being built in the City, and demand for private rented homes and owner-occupied homes continues to outstrip supply.  Whilst Brexit has reduced demand from outside the UK particularly from people visiting the City to study, domestic demand has largely filled this void, and there are signs that the Oxford has reasserted itself as one of the World's great learning centres with foreign students returning to the housing market when compared to 2017/18.

It seems certain that we are set for political and economic turbulence over the coming 6 months, but in the medium to long-term Oxford will remain a great place to live, work and invest.

Landlords having to wait 22.5 weeks for a Court hearing

According to the Residential Landlord Association, it now takes private landlords an average of 22.5 weeks from making a claim to the courts for a property to be repossessed to it actually happening, up from 21.6 weeks since the beginning of the year, new data shows.

One major problem causing the backlog is that the courts are unable to cope when landlords look to repossess properties for legitimate reasons using a Section 8 Notice.

The Government is currently in consultation on proposals to scrap Section 21 repossessions which give landlords access to an accelerated repossession.  If Section 21 is scrapped, there will be a significant increase in cases brought to the courts via Section 8 and the Government MUST publish plans for court reform to create more capacity and bring the current 22.5 weeks to 8 weeks or less.

The Government is being bullied by organisations such as Shelter who have adopted the banner ‘No-fault evictions’ and made that banner synonymous with Section 21 Notices.  This is just wrong.  If a few rogue landlords are finding ways to end tenancies for unlawful or unreasonable reasons, it is that which should be the focus of Government attention and not the accelerated repossession that 95% of landlords and their lettings agents use properly and as originally intended.

Without Court reform, this misguided new legislation will result in further Court congestion, a flood of Section 8 notices and landlords who have to wait 30 weeks or more to repossess their properties for legitimate reasons.

Coming hot on the heels of punitive tax reforms for landlords, and the tenant fee ban which has increased landlord costs, landlords who are already questioning whether to sell their properties, will be pushed out of the market for good.  This in turn will reduce the supply of private rented accommodation at a time when demand has never been higher.

Government has interfered enough in this market, and should not pile more pressure on landlords who already feel battered and bruised.

ARLA confirms rent rises following tenant fee ban

In a market snapshot for June, the Association of Residential Lettings Agents (ARLA) says the number of tenants experiencing rent rises increased to the highest figure on record.  Whilst June was the first month following the new legislation entering into law, the finding seems to confirm that warnings given to Government that rents would rise as a result of the tenant fee ban were valid.

Some 55 per cent of agents surveyed by ARLA saw landlord clients increasing rents during the month, a full 22 per cent up on the previous four weeks which itself had been a previous record high. 

Year-on-year, the number of tenants facing rent increases is up from 31 per cent in June 2017, and 35 per cent in June 2018.

Meanwhile letting agents had an average of 199 properties under management per member branch in June, a decrease from 201 in May.

Demand from prospective tenants also increased marginally in June, with the number of house hunters registered per branch rising to 70 on average, compared to 69 in May.

Unprecedented fall in costs of fixed rate buy to let mortgages

Across the board, interest rates charged for buy to let fixed rate mortgages have reduced according to Property Master.

It reports that the biggest fall recorded over recent weeks is in 5-year fixed rate buy to let mortgages at 75% of property value.  The fall is resulting in savings of £36 per month for borrowers.

The UK market is still dominated by landlords who are reluctant to re-finance to lower their cost of borrowing, despite this becoming a more familiar process in the area of utilities thanks to comparison sites.

At a time when landlord costs are rising, there has never been a better time to reduce the costs of borrowing.  Given the continuing uncertainty in relation to Brexit, accessing a 5 year period at fixed low interest rates is also attractive to guard against interest rates rising as a result of Bank of England intervention to off-set inflation caused by price rises in consumer goods, food and fuel.

Rents rise to the highest on record following the tenant fees act

Propertymark has published its latest private rented sector report which found that 45% of lettings agents witnessed rent increases in the lead up to the Tenant Fee Act coming into force.  Year on year this is reported as being up 61% from 2018 and is the highest figure that Propertymark has ever recorded.

The report also finds that the supply of private rented properties has remained relatively consistent Nationally with some regional variation, whilst demand from tenants has increased, pointing to some supply constraint emerging.

The Propertymark report comes at the same time that it is reported in the Guardian, that first time buyers now need to earn on average £54,000 to purchase a typical UK property.  That is a rise of 9% since 2016, with Zoopla commenting that it largely reflects an increase property prices.

Outside of London, Oxford and Cambridge require the highest household income of £69,000 and £72,000 respectively with Zoopla stating average house prices of £407,000 in Oxford and £422,000 in Cambridge respectively.  Of 20 Cities reported Liverpool was the most affordable.

With the income threshold for first time buyers rising, and private rented properties failing to match the increase in demand, it would seem likely that rents will continue to rise over the coming months, creating a real squeeze for young couples and first time buyers.

Oxford house prices performing better year on year than 12 months ago - which is bad news for first time buyers!

In the year to January 2019 Oxford house prices were up 0.9%, that’s up from 0.5% in the year to January 2018, showing a stronger upward trend overall.  Whilst this places Oxford 17^th in Hometrack’s most recent index of prices in 20 UK cities, it indicates that Oxford has avoided the negative growth experienced in London, and is now recovering more strongly than London and Cambridge.  Only Aberdeen recorded negative growth in the latest Index which showed an average increase in prices of 2.8% in UK cities.

13 cities are identified as having weaker growth than a year ago, with Oxford bucking this trend, albeit at low overall levels of growth.  Other cities growing more strongly than 12 months ago include Newcastle, Liverpool, Glasgow, Cambridge and Belfast.

Average time to a sale being agreed in Oxford is just over 12 weeks, and the average discount to asking price achieved at sale is around 4.5%.  This shows that whilst Oxford property has ‘lifted its nose’ the overall recovery is weak with pressure on asking prices.

Recent research by Together Money reveals that Oxford is the least affordable city centre for first time buyers with the average cost of property exceeding £7,633 per square metre.  That’s six times more expensive than the most affordable city – Sheffield.

A first-time buyer in Oxford typically requires a mortgage of 133% of the average local income.

Oxford, Brighton, Cambridge and London are all grouped at the bottom of the table of least affordable city centres for first-time buyers.

As regular readers will know, this blog has been critical over a number of years that Oxford City Council has not got a grip on new build for first time buyers, and this research finding is the net result. 

Many first time buyers who wish to live and work in Oxford are now looking to Bicester, Abingdon and Didcot where better value can be found.  These people then commute to work in Oxford exacerbating traffic congestion and pollution.

Oxford house prices rising ahead of earnings

House prices in Britain's cities have increased ahead of earnings growth causing homes to be the least affordable since 2007 according to Lloyds Bank.

The average house price within UK cities according to Lloyds has risen from £180,548 in 2013 to its highest ever level of £248,233 in 2018.

In comparison, average city annual earnings over the same period have risen by just 11% to £34,366.

Lloyds identify seven cities where average house prices are now more than 10 times typical earnings - Oxford, Chichester, Winchester, Truro, London, Bath and Cambridge.

In Oxford, average house prices now stand at more than 12-and-a-half times earnings in the city - equivalent to £460,184 per property.

In addition to Oxford, Chichester stands at 11.5 times wages, Winchester at 11.3, Truro 11.1, and Greater London, Bath and Cambridge all at 10.3 times wages.

Despite this the market has seen the number of first-time buyers at a high and homeowners are still attracted to cities across the UK.

Winchester recorded the biggest price rise of any UK city over the past decade with a gain of 93% from £281,224 in 2008 to £541,891 in 2018, compared to the UK cities average of 35%.

Whilst over the last year Oxford property prices have stagnated, its historically strong house price growth combined with high demand for private rental properties means that buy to let investors continue to make strong returns of investment.  Investor who have owned their properties 5 years or more have typically seen annual returns on their investment of c14% when capital growth and rental yields are combined.  And, despite Brexit uncertainty, Oxford has not followed London property into negative price growth, once again proving to be a dependable stable asset.

Tenant Fee Ban Confirmed for 1 June 2019

The latest in a series of legislative changes that bash Oxford’s landlords will come into force on 1 June 2019.  From 1 June neither landlords nor their agents will be permitted to charge fees to tenants for anything.  Historically, the cost of credit reference checking and tenancy agreement drafting has been shared by the tenant and the landlord.  In future these costs will be solely the responsibility of the landlord.

MP’s of all parties have supported this new legislation in the mistaken belief that it will reduce the cost associated with renting for the more than 5 million voters who rent their homes from private landlords.

This new law comes hot off the heels of the 3% stamp duty surcharge levied on landlords when they invest in a new buy to let property, and the tightening of tax laws that no longer allow landlords to off-set mortgage interest payments.  These changes have already undermined landlord profits prompting many to sell properties, reducing the number of private rented properties available for tenants at the very time that demand for such homes is at its highest-ever level. 

The ban on tenant fees will further increase the costs borne by landlords, further eroding their returns, and will prompt even more to sell their properties, further reducing supply.  There is already evidence emerging from London that indicates that house prices are falling, but rents are rising at a higher rate than inflation.  Why?  Because the reduced availability of private rented properties at a time of peak demand is driving up rents.  Simple supply and demand economics!

With the government bashing Oxford landlords, they have just 3 choices if they are to protect their returns: 1. sell their property and target investment return from other assets; 2. Increase rents to cover their increased costs; or 3. Change their portfolio to achieve the enhanced returns that HMO properties offer.  The first will exacerbate supply constraints causing excess demand to push rents higher.  The second will further increase rents.  The third, will distort the supply of 3 and 4 bed family homes to rent, causing additional supply constraint in parts of the housing market.

As normal, Government intervention in the market is having unforeseen consequences – although this blog and many others warned of them as the legislation was drafted and debated.  Far from making private renting more affordable for tenants the banning of a one-off fee of £275 to £300 will result in higher monthly rents which in turn will make passing rental reference checks harder, and security deposits larger.

Without a massive increase in the supply of new affordable starter and second homes in Oxford, house prices will force many people to rent.  The properties being sold by landlords exiting the Oxford market will continue to be unaffordable to young couples and many families.  Whilst Brexit is having a drag on property sales, to date Oxford prices have held firm.  The only solution is to increase the supply. 

Until then, Oxford needs private landlords, and should create an environment that values high quality rental properties provided by good landlords and which recognises the vital role they play in the City’s housing market.  Without the private rented sector, people will be forced out of Oxford to Bicester, Abingdon, Didcot and Kidlington.  In turn increasing commuter journeys, worsening road congestion and pollution in and around the City.

Fighting against the rising tide

The rising tide of legislation impacting landlords shows no sign of abating.  Just as global warming is causing sea-level to rise, lettings legislation is causing landlords to drown.

From mandatory HMO licencing, to mandatory information for tenants and minimum EPC standards the burden of rules is ever-increasing.  It is now all too easy for good self-managing landlords to forget something and find themselves in breach of their obligations.  For others, they are being let down by their agents, who have not kept up to date themselves.

The most recent example of this is was recently reported in Property Industry Eye which reports that landlords inadvertently granting assured tenancies rather than the Assured Shorthold Tenancies they had intended.

It means that they will always be unable to use Section 21 notices for repossession.

Judgment in a court case last year has led to what could be ‘thousands’ who thought that they had complied with the law – but now find that they haven’t.

Furthermore, attempts to put right a simple administrative error would be out of the question.

In last February’s case, Caridon Property Ltd v Monty Shooltz, it was ruled that a landlord who failed to give the tenant a current gas safety certificate before the start of the tenancy, could not put it right by issuing it after the tenancy began.

The judge ruled that under the Deregulation Act 2015, failure to issue a gas certificate before a tenancy begins invalidates any subsequent Section 21 notice. The mistake cannot be corrected.

In Caridon Property Ltd v Monty Shooltz, District Judge Bloom ruled that because the tenant had only been served a gas safety certificate 11 months after the tenancy began, a prescribed requirement had not been complied with.

The landlord had served a Section 21 notice on the tenant, but the Judge ruled this invalid.

Normally, rulings in county courts are not treated as binding or as legal precedents. But it is reported that the ruling in Caridon Property Ltd v Monty Shooltz is likely to be considered definitive by other courts.

Until the case, landlords – and agents – who had failed to issue a gas safety certificate at the prescribed time, would do so later before serving a Section 21 notice.

Following last year’s case, the legal community and landlord bodies had widely expected the Government to address the issue by amending the AST and Gas Safety Regulations, arguing that it had never been intended to impose such draconian requirements on landlords.

Many self-managing landlords’ will be well advised to appoint a reputable letting agent that is a member of a professional body such as The Association of Residential Lettings Agents (ARLA) so that they are properly advised and through their agent ensure that they remain on the right side of the law.

It seems that Government just can’t stop meddling in the buy to let sector – the abolition of mortgage interest rate relief, the ban on fees charged to tenants, ever-draconian requirements of landlords to protect tenant interests.  None is well considered, do nothing to improve the market but do appeal to the 5million voters who privately rent their home.

Oxford is a top 3 city for house prices since 2008

The latest Hometrack city index report includes an interesting analysis of how house prices have recovered since the financial crisis in 2008.  Three of the 20 cities included in the regular analysis - Belfast, Aberdeen and Liverpool are all still below their 2008 levels at -28%, -3% ad -1% respectively.  Joining them in the bottom 5 are Glasgow just 1% up over 10 years and Newcastle +3%.

Oxford comes in 3rd in the list at +55% behind Cambridge (+70%) and London (+65%) and ahead of Bristol (+53%) and Portsmouth (+36%) which complete the top 5 Cities in the index.

It is interesting to note that the top performers are currently experiencing a relative lull in house price growth whereas the poorer performers are top of the current charts for house price growth including Liverpool, Newcastle and Birmingham.

Over the last 3 months Oxford prices have been flat at just 0.1% increase overall, and recording a 0.5% reduction over the last month.  Over the last 12 months Oxford remains in positive territory showing growth of 0.5%.

Cambridge and London each of which have seen some negative pressure over recent months have recovered and move back into positive territory albeit tentatively.  It appears as if Oxford is perhaps following them into a short period of negative growth, albeit less marked, and to date having avoided overall reduction.

The Oxford house sale market is characterised by many available properties, giving buyers choice, with many properties selling below asking price, a trend tha is now apparent via land registry data.  July and August are often subdued months for house prices, so it will be interesting to see how the market reacts as we move into September.

Private rented homes – the key to avoiding a full-blown Oxford housing crisis.

Everyone has an opinion about what’s wrong with the private rented sector (PRS)…some have informed opinions, others seem ill-informed.  Few take time to consider the role played by PRS in the wider property market.  How important is the PRS to the UK housing market?

In 2003, according to data from Shelter, the PRS was 2.55m homes or 11.9% of total UK housing.  By 2014 it had grown to 4.59m or 19.7% of the total UK housing market.  To put that into perspective in 2014 total new building created 112,400 homes or less than half the annual growth of the PRS.  In 2014, the PRS provided 14% more homes than social housing owned by local authorities and housing associations combined!

This goes to show that the PRS is a massively important source of housing supply.  By early 2015 the UK had 5.4m households who relied on the PRS, and according to PwC that is set to rise to a massive 7.2m by 2025 – an increase of one-third. In 2014, 2m private landlords owned and let 4.6m homes.  Based on the same ratio of ownership, an additional 783,000 landlords are needed by 2025 if the demand forecast by PwC is to be serviced effectively.

In 2014, the UK’s private landlords banked £14.2bn.  With demand set to increase by one-third, it is no coincidence that the Exchequer has imposed a stamp duty surcharge on 2^nd homes.

The stats show that our ‘beloved’ politicians are right to want to ingratiate themselves with tenants – they are a large block of voters and one that is growing rapidly in number.  But, the nation needs new and existing landlords to keep investing, or there will be a genuine housing crisis that the public sector has no hope of addressing.  Tenants will not thank politicians for undermining the supply of affordable good quality rental properties.

How does Oxford compare to these national statistics?

In Oxford, according to the 2011 census the PRS accounts for 28% of the total housing stock.  If student households are stripped-out, the PRS still accounts for 26%, meaning it is more significant in our City than is the case nationally.  In Oxford, just 47% of households own their own home vs. a national average of 63% and 21% live in social rented housing vs 18% nationally. 

These statistics are not a surprise in one of the countries least affordable cities.  New build supply is historically weak in Oxford and is a major constraint for both first-time buyers and down-sizers increasing demand for rented homes, and locking-up the housing market respectively.  Over the 4 years to 2015 less than 1,000 net new homes were added to the city an average of just 247 homes per annum or less than 1% per annum. 

Even if this changes materially, the PRS remains strategically important to the City.  Between the census years of 2001 and 2011, the PRS grew by 45% dwarfing the growth of other forms of tenure.  Without a massive increase in new supply, demand pressures will continue to grow making a stable, high-quality PRS critical to avoid a full-blown housing crisis in Oxford.

It appears to me as if Oxford City Council recognises this picture and is focussed on improving standards through licencing of shared houses, and by encouraging landlords and their agents to raise standards.  Inevitably this is increasing costs, but it is a positive, productive policy that raises standards across the City and one which most landlords will respond to positively.

Why is it that Parliament seems to have it in for landlords?

I can understand why the Government and the Bank of England are concerned to ensure mortgage debt remains affordable as interest rates rise to long-term trend norms.  New mortgage lending rules for buy to let are sensible, and make the whole sector more resilient.

However, other changes seem poorly considered and motivated by pure politics rather than any genuine appreciation of the Housing market and the importance of a stable PRS over the years to come.  Too many landlords feel that they are being demonised, and are choosing to stop future investment with others simply divesting altogether.  In some parts of the country the PRS is shrinking at the very time it needs to grow to buy time for a massive expansion of new building.

The political shift towards populism is in danger of disrupting this strategically important sector of the UK’s housing market.  Politicians need to recognise that anti-landlord policy has gone too far.  By all means, rid the sector of rogue landlords, work with professional agents and landlords to raise standards, make client money protection mandatory, make private rented homes safer and encourage higher environmental standards.  But, it is time to stop discouraging new investment and increasing landlord taxes. The vast majority of landlords provide good-quality homes which are badly needed as demand continues to grow.