70% of Oxford landlords vote to remain in EU - So what now for Oxford landlords?

Afternoon all,

Well, well, well who was expecting that? Not I for one which has cost me a considerable amount of credibility as a know all!

It’s 5.50am as I start to type this article and David Dimbleby has just announced the UK will be leaving the EU as the final votes are counted. As most of the polls suggested a Remain Vote, and with Oxford voting overwhelmingly for Remain, it has come as a surprise particularly in the City of London Sterling has dropped 8% this morning after City analysts got their predictions wrong and MP’s from the Remain camp are using words like “challenging times ahead”. 

Now that the vote has been made, what next for Oxford homeowners, and especially the 13837 of Oxford homeowners with a mortgage?

 

Oxford Property Values

Since 2006 the price of a 1 bedroom apartment in Oxford has doubled in value, despite the longest and deepest recession in living memory.  That’s a compound annual growth rate (CAGR) of 7.18% at a time when Bank of England base rate has been at 0.5%.  Since the last In/Out EU Referendum in June 1975, property values in Oxford have risen by 2132.8% (that isn’t a typo).

Another Credit Crunch?

The same Credit Crunch doom-mongers and Sooth-Sayers that predicted soup kitchens in 2008/9 are predicting Brexit meltdown. Bad news after all does sell newspapers. Stock markets may rise, stock markets may fall, yet the British public have always continued to buy property. Aspiring first time buyers and buy to let landlords dust themselves down, take a deep breath and carry on buying.  Why? because us Brit’s love our Bricks and Mortar, we like to own the roof over our head, and property has rivalled all other investments over the last 20 years offering stability during difficult times and capital growth over the longer-term.

Interest rates 

Since 2009, interest rates have been at 0.5% and lots of people have become accustomed to those sorts of levels. Interest rates in the 1986/88 property boom were on average 9.25%, the 1990’s they were on average around 6.5% and uber-boom years (when UK property values were rising by 20% a year for three or four straight years across the UK) rates were on average 4.5%. Many of you reading this who are in their 50’s and older will remember interest rates at 15%.  But I suspect interest rates won’t rise in response to the leave vote, as Mark Carney (Chief of the Bank of England) knows, raising interest rates risks deflation – which is not what the British economy needs at the moment. It seems more likely that The Bank of England MPC will look to preserve confidence, ensure the banks have the liquid capital they need to support business and as a result it seems just as likely that interests could be reduced extending the Bank’s policy of the last 5 years.

Whilst property values might drop across the country, strong local markets such as Oxford may well benefit from investment as the low value of sterling enhances the value of property to foreign investors. 

Oxford landlords

The 4,701 Oxford buy to let landlords have little to fear nor do the 11,612 tenants living in their properties. Buy to let is a long term investment. There might well be some buy to let bargains in the coming months as some people, irrespective of the evidence, panic and sell their property.  Even if we pull up the drawbridge at Dover and immigration stopped today, the British population will still increase at a rate that will exceed the current property building level. Britain is building 139,600 properties a year, but according to the eminent ‘Barker Review of Housing Supply Report’, the country needs to build about 250,000 properties a year just to stand still.  The UK birth rate is increasing, the population is living longer with just under a quarter of all UK households being occupied by a single person demand is only going up whilst supply is stifled. Greater demand than supply equals higher prices over the medium to long-term irrespective of any short-term blip.

Oxford’s population is growing with one-third of the population being aged between 18 and 39 years and some 30% of the total population living in privately rented accommodation.  These demographic trends will continue to drive demand for property by investor landlords, first time buyers and growing families who need more space.  Many regard Oxford’s property market to operate in a ‘bubble’, whilst it would be foolish to believe Oxford will avoid any impact from the leave vote, it is not fanciful to believe that the impact will be less than for many other UK cities, and that demand for property is sufficiently robust to ensure investment return and rental yields will remain attractive. 

So, what will happen next?

Well, first and foremost Oxford needs to get over the shell-shock of a National vote result that is so at odds with the local preferences.  The remain vote in Oxford was larger than that of Scotland, and we will all need to take a little time to get used to the implications that will result.   It seems unlikely that Oxford will initiate an independence vote, and whilst there are many challenges ahead, the Oxford property market, which is supported by demographic and local economic fundamentals that will help it to resist the worst of the turmoil, and continue to offer investors a healthy return

Feel free to call me all. Happy weekend to you. 

Richard