‘Generation Rent (Forever)’ – 15,890 Oxford Tenants have no intention of ever buying a property to call home

How good were the good old days of the 1970’s and 1980’s when young people could afford to buy their own home, and chose to do so?  Well…not THAT great - 24% inflation, 17% interest rates, 3 day working week, 13% unemployment, power cuts.   So why aren’t the 20 and 30 something’s buying in the same numbers 30 or 40 years on?  After all, inflation is below 2%, interest rates are at an all-time low, unemployment is below 5%, and the lights stay lit 24/7.

Many people blame the credit crunch and global recession of 2008, which had an enormous impact on the Oxford housing market. Confronting a problematic mortgage market, the requirement by lenders for bigger deposits, reduced job security particularly for young adults and declining disposable income, 18 to 24 year-olds found it challenging to assemble the monetary means to get on to the Oxford property ladder.

However, I would say there has been something else at play other than the issue of raising a deposit - having sufficient income with rising property prices in Oxford. Whilst these are important factors and unquestionably barriers to homeownership, I also believe there has been a generational change in attitudes towards home ownership in Oxford (and in fact the rest of the Country).

Back in 2011, the Halifax did a survey of thousands of tenants and 19% of tenants said they had no plans to buy a home for themselves. A recent, almost identical survey of tenants, carried out by The Deposit Protection Service revealed in late 2016, revealed that figure had risen to 38.4%, with many no-longer equating home ownership with success and believing that renting is better suited to their lifestyle.

You see, I believe renting is a fundamental part of the housing sector, and a meaningful proportion of the younger adult members of the Oxford population choose to be tenants as it better suits their plans and lifestyle. Local Government in Oxford (including the planners – especially the planners), land owners and landlords need to create an adaptable Oxford residential property market that allows for the diverse choices of these Oxford 20 and 30 year olds to be met.  Whilst Government help-to-buy schemes have boosted first home ownership for those who choose it, they have remained peripheral for many affluent young adults, who have chosen to rent to ensure that they remain geographically flexible to develop and promote their careers UK-wide and Globally.

This means, if we applied the same percentages to the current 41,381 Oxford tenants living in 15,980 private rental properties, 15,890 tenants have no plans to ever buy a property – good news for the landlords of those 6,136 properties. Interestingly, in the same report, just under two thirds (62%) of tenants said they didn’t expect to buy within the next year.  But does that mean the other third will be buying in Oxford in the next 12 months?

Some will, but most won’t … in fact, the Royal Institution of Chartered Surveyors (RICS) predicts that, by 2025, that the number of people renting will increase, not drop. Yes, many tenants might hope to buy, but the reality will be different for the reasons set out above.  The RICS predicts the number of tenants looking to rent will increase by 1.8 million households in the UK by 2025, as rising house prices continue to make home ownership increasingly less affordable for younger generations or relatively expensive compared to other spending priorities.  So, if we applied this rise to Oxford, we will in fact need an additional 6,849 private rental properties over the next eight years (or 856 a year) … meaning the number of private rented properties in Oxford is projected to rise to an eye watering 22,829 households.  So why is Government policy dissuading new investments by landlords?

Oxford Landlord Seminar reminder!

Dear Landlords,

A polite reminder!

As many of you know we are holding a Landlord Seminar at The Oxford Spires Hotel, Abingdon Road on 2^nd March.  The seminar will start at 6pm and run through to 7.30pm.  The purpose of the session is to help you to understand the changes that will be made to the way mortgage interest payments can be claimed by landlords, how the new rules will be phased in from 5 April 2017 and to consider some practical steps that you might want to consider to off-set the effect of the new rules.

Gerry Jackson of Oxford Chartered Accountants Critchley’s will outline the changes that are scheduled, and will bring to life the way the changes will impact landlords in 2017 and then progressively through to 2020.  Carl Selby of Oxford Solicitors Hedges Law will outline the pros and cons for landlords of moving to a corporate structure – either a limited company or partnership, and Gerry will discuss the implications of these structures in terms of stamp duty land tax (SDLT) and capital gains tax (CGT).  This 40 minute session will give you an appreciation of the planned changes, and will help you to consider whether there are any practical steps you can take to plan effectively.

After a break for coffee, Ollie Sills of UK leading Mortgage Broker London & Country will discuss the merits of re-mortgaging in 2017 and how mortgage funding might be affected by a move to a corporate structure.  Ollie will outline the mortgage assessment changes that many lenders have already implemented and how they might affect your application for new funding.

Finally, there will be an opportunity to ask the experts any questions you might have before we wrap-up and close at 7.30pm.

I am delighted if you have already confirmed your attendance with us, however if you would like to book in for this event, please email oxford@martinco.com to reserve your place, however spaces are now limited so please confirm quickly!

Kind regards,

Richard

Oxford First Time Buyers borrow £76.2m in the last 12 months

Over the last 12 months in the UK, 1,061,557 properties were sold with a total value of £223.74 bn. To give that some context, ten years ago 1,581,727 properties sold with a total value of £405.56bn, so it can be seen the number of people moving house has dropped by over a third over the last decade.

Whether you are a landlord, homeowner or tenant, it’s always important to keep an eye on the Oxford property market.  Over the last 12 months, 1,586 properties have sold (and completed) in Oxford, worth £780.9m. Interestingly the number of properties changing hands in Oxford has also dropped when compared to a decade ago.

It might also surprise you that first time buyers in 2017 will benefit from a decline in purchases by Oxford buy-to-let investors.

Those looking to buy a home in the spring of 2017 will face a far less competitive Oxford property market than the same time of year in 2016, when the urgency to beat the buy-to-let stamp duty hike was in full swing

Many landlords brought forward their purchases to beat the tax, and since then, the number of buy-to-let purchases has dropped by around 12%. First time buyers have taken advantage of that and have increased their buying. In fact, looking at the Bank of England figures, this is what UK lenders have lent on buy-to-let properties versus first time buyers over the last 12 months:

When looking at the figures for Oxford itself, first time buyers have borrowed more than £76.2m in the last 12 months to buy their first home. This is a ringing endorsement of their confidence in their jobs and the local Oxford economy. Those 20 and 30 something’s who are considering being first time buyers in 2017 will find that the number of properties on the market has never been as good as it has for quite a while, meaning you have more choice of properties and less competition from so many buy-to-let landlords.

Rightmove announced nationally that new seller enquiries are 26% up on the same time last year giving the stoutest indication that we may see a slight ease in the lack of properties on the market. When I look at the Oxford market, at this moment in time there are an impressive 729 properties for sale, so plenty of choice, which is welcome news to all potential buyers.

2017 will be an interesting year for homeowners, be they buy-to-let landlords, existing homeowners or future homeowners. 

Have you ever considered an HMO investment in Oxford?

Afternoon all,

Further to our recent post regarding HMO opportunities I went on the hunt for a few examples of how these can make outstanding investments.

This one in Hawkins Street, Cowley is on the market with Connells, East Oxford office for £460,000. So I now turn my attention to the rental achievements in this area for houses in multiple occupancy.

Now admittedly this is a mixed bag of 'currently available' and 'let' but they all point to very attractive numbers. in reaching my conclusion I have considered 2 scenarios - firstly I look at the lower case rental price and then the upper level rental price.

At the lower I look at £2500 per calendar month which gives you a rental yield of a whopping 6.5% and that's for starters! Broken down this equates to £500 per room per tenant. Whilst it is a 4 bed property this can be used as a 5 bedroom HMO with the dining room being used as an additional bedroom.

On the upper level there is strongly weighted evidence to indicate that the rental achievement could get even better.

There are 5 bedroom properties being advertised and that have already let at the following prices:

£3000pcm
£2900pcm
£2850pcm
£2700pcm
£2600pcm

I have reviewed alot of these properties very closely and they all vary somewhat in layout, size and condition, however they are all in the same location (Cowley central) and right where the demand tends to be amongst students and professional sharers.

There looks to be a little bit of work required here to bring it to standard. I would suggest a redec and re-carpeting of the entire property and some additional furnishings in places. On the plus side the kitchen looks pretty good however the bathroom will need to be looked at during a viewing as there are no pictures listed.

If I was pushed to place a price on this property for rent I would sway towards £2500 to let it to professional sharers. Alternatively if it was put into the student cycle then it may achieve a great deal more but this is seasonal marketing at the right times during the year (November - March) if this became a serious consideration. The rents in this case are more likely to achieve between £2600 and £2800 per calendar month.

Managing and maintaining an HMO is not without great consideration but if handled correctly and by the right people the returns can be astronomical in a market where 5% yields are very few and far between.

For more on this including what is required when applying for HMO licenses and what to expect please give me a call.

Best regards

RIchard

I wrote to my MP - Andrew Smith

Here's what I wrote:

Dear Sir,

I own a small business in Oxford City Centre.  Martin & Co Oxford trades as an independent Estate and Lettings Agent managing 320 properties in and around central Oxford, and a further 300 that where we find tenants for landlords.  All the properties that we support are owned by private landlords, the majority owning 1 to 3 properties, with some at the upper-end owning 10 or more properties.

 In Oxford, property is amongst the least affordable in the UK, making house ownership an unrealistic ambition for many residents.  New affordable homes for purchase are lagging demand, and demand for rental property outstrips supply.  Rental values are high as a result, and greater supply of good quality rental homes is badly needed, but will take 5 to 10 years to create.

 Recent legislation has increased the cost of purchase for any property that is not a principle residence via a 3% surcharge on SDLT.  This has reduced transaction volumes since last April by around 12% in Oxford.  However, due to demand outstripping supply house prices have continued to rise.  The reduction in transactions reflects fewer new investments by private landlords, further exacerbating the under-supply of rental property, resulting in rental values rising in parallel.

 The planned changes that limit private landlords from off-setting mortgage interest payments against income tax, will have a further profound impact on private landlords, and there are already indications that it is limiting new investment by current landlords, and in some instances resulting in them divesting property.  There is also clear expectation amongst landlords, that the changes will undermine their returns, and result in them increasing rents to claw back their losses.  The Royal Institute of Chartered Surveyors (RICS) has recently flagged this as a concern.

 I am writing to you, as I believe that current legislation has gone too far, and will result in unwanted consequences – reducing the availability of rental properties in a City where the gap between average income and average house price is comparable with parts of London.  This reduced supply, plus landlord’s looking to protect their investment returns risks the RICS prediction coming to fruition – an above trend increase in rental costs, causing more potential tenants to fail affordability tests at a time when social or more affordable alternatives are unavailable.  Since 2008, Oxford’s landlords have proven to have been very cautious in increasing rents, recognising the economic uncertainty faced by many tenants.  Since 2008 Oxford rents have not kept pace with inflation.  Current and planned legislation looks likely to result in that positive trend being broken, with rents rising well above long term trend, damaging the interest of tenants.

Most private landlords in Oxford take care to look after their tenants.  That has created stability based on good but not spectacular financial returns for landlords skewed towards capital appreciation rather than rental yields.  I am concerned that policy has gone too far and that working people in our City will suffer as a result.

Regards,

 Bill

And, here's the reply I received:

Property investment opportunity in Littlemore, Oxford

Ah ha, this one takes me back only to August of last year and in exactly the same street. Pheasant Walk, Littlemore that had a very happy ending (so to speak!)

During January of last year I had an investor approach me looking for the ideal investment opportunity. We went high, we went low, we went left and then right and finally I stumbled on Pheasant Walk. A 1 bedroom maisonette on the market for £220,000. One viewing later it was sale agreed and on the day of completion it was already let. I like to be prepared!

This one, currently on the market with Amelies, east Oxford for £225,000 has plenty of scope to be a super investment.

It is pretty much identical to the one I look after which fetches £875 per calendar month. I fully expect £895 - £925 in the right market (that being the warmer period) but £895 now at the minimum. Against asking price this gives you 4.7% rental yield. Whilst I absolutely encourage a price offer between you and I this price is pretty much on the money.

They do tend to sell around their asking price because they do genuinely represent very good investments. That shouldn't
stop you trying for a deal but the margins based on rent do allow you to get away with paying asking price if you needed to.

Their growth is pretty steady as well. 4b Pheasant Walk sold for £188,000 on the 31st October 2014 and just over 2 years later they are now fetching £225,000. That is a 19% increase in 2 years! Hmmmmm, I must ask my bank if they can match that on my savings account?!?!?!?

Call me if you would like to know more.

Richard

Mortgages at an all-time low

At our Landlord seminar on 2 March at the Oxford Spires Hotel, we will consider the pros and cons of re-mortgaging.  So why is it that this is now so timely?

Well, last week Mortgages for Business indicated that the average price of two and three year fixed rate loans had hit all-time lows of 2.92% and 3.76% respectively.

Now, Mortgage Brain, the technology firm that supports lenders has stated that the cost of an 80% loan to value (LTV) 2-year fixed rate mortgage is now 18% lower than it was at the start of 2014 and 11% lower than it was a year ago.  Similarly, the lowest rate 3-year fixed rate mortgage with an 80% LTV is 16% lower than it was three years ago and 10% lower than last year.

However, it also reported that there is evidence that the market is now levelling out and appears set to move away from the long period of historic lows rates in terms of fees and low interest rates.  It is therefore important that Landlords seek to lock-in these historic low rates to take advantage of stable low rates over the coming months.

At our seminar Ollie Sills of London & Country Mortgages (L&C) will speak on the current mortgage market.  L&C is the leading mortgage broker nationally maintaining the most extensive panel of lenders, enabling them to offer a whole of market view of the the pros and cons of re-mortgaging.

If you are yet to reserve a place, please email me at info@OxfordPropertyBlog.co.uk to confirm your attendance.

Let’s unpick the Oxford market a little more

Over the last 5 years Oxford home owners have seen their property increase in value by an average of 37%.  The average price paid for a property based on all registered transactions over the last 12 months was £400,063.  But, last year the total number of transactions fell by 12% compared to the previous 12 months.  So the BIG question is….is oxford losing its shine as a place to invest in property?

Why are transaction volumes down?  Last April the Government applied a stamp duty surcharge on properties bought that were a 2^nd property owned.  This resulted in a surge of transaction during March 2016, which was followed by a real lull in transactions.  Following the new stamp duty rules, there have been fewer completed transactions by landlords buying to privately let their properties.  The government, will chalk that up as a success, believing that it frees the market for owner occupiers, and stops landlord demand pushing-up house prices.

Has demand reduced?  No, demand for Oxford homes has apparently remained constant or at least it has remained balanced with available supply of properties for sale.  Rightmove reports that prices in 2016 were 6% up on the previous 12 months; Zoopla reports that they were just 3.9% higher.  Dataloft which monitors all sales report that in the 12 months to October 2016, prices were up 10%.  Given that Land Registry data is holistic it makes most sense to place most reliance on the Dataloft data.

If demand from landlords has reduced due to the increased costs of stamp duty, one has to assume that demand from owner occupiers has filled the void.

How have different property types performed? The table below shows the average increases in value for different property types for Oxford as a whole, and for grouped post code segments, based on Land registry data for the 12 months to October 2016.  It shows quite broad variation across Oxford and between property types.

Overall, flats/apartments have performed strongly particularly in OX3, OX4 and particularly in OX5.  Terraced properties in OX1 and OX2 have performed strongly, reflecting the higher density of this housing in key post-codes.  Detached home performed strongly across post codes except for OX3.  The street with the highest number of transactions was High Street, OX5.

How will Oxford property prices perform in 2017?  Whilst transaction volumes continue to be below pre-April 2016 levels, the market is stable as we enter 2017.  Nationally, Rightmove is reporting asking prices are up 0.4% in January, which is consistent with the Office of Budget Responsibility (OBR) estimate that prices will rise 3.4% across the country in 2017.  In 2016, Oxford property out-performed the national average of 6.4% and I expect it to continue to out-perform the national average.  When my clients ask me for my prediction, I say the best properties – locationally, and decoratively – will achieve 6%, with the average for Oxford being between 3.5% and 6%.