How is Oxford’s rental market changing?

In Oxford, like the rest of England, around 20% of all homes are now rented.  A recent survey of people showed a decrease in the proportion of young people (under the age of 35) who own their own home, and separately another study showed an increase in the number of people who don’t ever expect to own a home.  Of greatest concern to first time buyers is their ability to save for the deposit required under the new mortgage lending rules.

So, what does this mean for Oxford’s private rented sector?  Firstly, growth in demand in the City seems likely to be sustained over coming years.  Whilst UK government policy is making life financially harder for landlords, it reflects a recognition that the private rented sector has become an important and permanent part of the urban housing landscape.  As more and more people depend on private rented homes for longer periods of their life, it has become important for government to appeal to this group of voters by being seen to help them (e.g. via a future ban on fees charged to tenants).  It has also become much more important that the private rented sector can withstand a financial shock.  Bearing down on landlords with high levels of debt by increasing the cost of entry for new investment (via the stamp duty surcharge), and increasing the cost of debt (via the reduction of mortgage interest rate relief; and the introduction of tougher loan to value ratios), should reduce the long-term volatility in the sector.  How? Well, in the short-term as highly geared landlords choose to sell some or all of their portfolios volatility looks set to increase.  This may bear down on property prices for a period, but as far as government is concerned that’s OK – they welcome anything that reduces the cost of housing for owner occupiers.  Their calculation is that over the longer term, professional landlord’s – private and corporate, will fill the void, create a more robust private rented sector with long-term investment strategies and with sustainable levels of debt.

In Oxford, it seems likely that the impact of government policy will be felt more acutely because the entry cost of property is relatively high, the average rental yield is relatively low and landlord returns have been dependent on the capital appreciation of property year on year.  Because of that, rents in Oxford have risen more slowly, as landlords recognized the need to ease the rental cost for tenants during some tough years between 2008 and 2015, relying instead on predictable capital growth.

Looking forward, I believe that a significant trend in Oxford will be an increase in demand for rented family homes.  As tenants either choose not to buy their own property, or feel unable to save for a deposit, they will spend longer in the properties they occupy.  As their families grow they will look for different accommodation that better suits their needs, and location will be determined by different factors such as proximity to schools, access to commuter routes and child friendly open spaces.  Oxford caters well for this maturing and shifting demand.  Places like Littlemore, Greater Leys, Marston & Headington, Hinksey, Osney and Grandpont with their terraced and semi-detached homes offer a wide choice of property for renting families.  Often, such properties have been licensed as houses in multiple occupation by landlords, and whilst that demand will continue, there will be growing demand for well presented, modernized family homes in the City’s private rented sector.

In addition to demand for family homes, I believe that there will be demand for longer tenancies and new models for renting.  I was alerted by a client and blog reader this week to ‘rent to own’ models that have become established in other markets, and which are gaining traction in the UK.  These are long-term agreements between landlords and their tenants, which provide the tenants with security of tenure, and the option to buy at a date in the future.  The landlord benefits from long-term, stable income and an assured future exit.  As government policy tightens, and investment returns reduce, landlords will demand stable, less volatile income streams, over the longer periods of time.  They will accept lower returns provided they are predictable and stable.  Tenants will remain in the rented sector through extended stages of their lives, and will also demand greater security of tenure, the ability to put down roots, personalizing their homes to their needs. 

We property professionals who work with, support and guide our clients with their property investments, need to be ahead of the curve to innovate and allows tenants and landlords to meet each other’s needs by enabling new models to be introduced. Failure to innovate by landlords, tenants and their agents will undermine the private rented market over the coming 5 years.

In Oxford, like the rest of England, around 20% of all homes are now rented.  A recent survey of people showed a decrease in the proportion of young people (under the age of 35) who own their own home, and separately another study showed an increase in the number of people who don’t ever expect to own a home.  Of greatest concern to first time buyers is their ability to save for the deposit required under the new mortgage lending rules.

So, what does this mean for Oxford’s private rented sector?  Firstly, growth in demand in the City seems likely to be sustained over coming years.  Whilst UK government policy is making life financially harder for landlords, it reflects a recognition that the private rented sector has become an important and permanent part of the urban housing landscape.  As more and more people depend on private rented homes for longer periods of their life, it has become important for government to appeal to this group of voters by being seen to help them (e.g via a future ban on fees charged to tenants).  It has also become much more important that the private rented sector can withstand a financial shock.  Bearing down on landlords with high levels of debt by increasing the cost of entry for new investment (via the stamp duty surcharge), and increasing the cost of debt (via the reduction of mortgage interest rate relief; and the introduction of tougher loan to value ratios), should reduce the long-term volatility in the sector.  How? Well, in the short-term as highly geared landlords choose to sell some or all of their portfolios volatility looks set to increase.  This may bear down on property prices for a period, but as far as government is concerned that’s OK – they welcome anything that reduces the cost of housing for owner occupiers.  Their calculation is that over the longer term, professional landlord’s – private and corporate, will fill the void, create a more robust private rented sector with long-term investment strategies and with sustainable levels of debt.

In Oxford, it seems likely that the impact of government policy will be felt more acutely because the entry cost of property is relatively high, the average rental yield is relatively low and landlord returns have been dependent on the capital appreciation of property year on year.  Because of that, rents in Oxford have risen more slowly, as landlords recognized the need to ease the rental cost for tenants during some tough years between 2008 and 2015, relying instead on predictable capital growth.

Looking forward, I believe that a significant trend in Oxford will be an increase in demand for rented family homes.  As tenants either choose not to buy their own property, or feel unable to save for a deposit, they will spend longer in the properties they occupy.  As their families grow they will look for different accommodation that better suits their needs, and location will be determined by different factors such as proximity to schools, access to commuter routes and child friendly open spaces.  Oxford caters well for this maturing and shifting demand.  Places like Littlemore, Greater Leys, Marston & Headington, Hinksey, Osney and Grandpont with their terraced and semi-detached homes offer a wide choice of property for renting families.  Often, such properties have been licensed as houses in multiple occupation by landlords, and whilst that demand will continue, there will be growing demand for well presented, modernized family homes in the City’s private rented sector.

In addition to demand for family homes, I believe that there will be demand for longer tenancies and new models for renting.  I was alerted by a client and blog reader this week to ‘rent to own’ models that have become established in other markets, and which are gaining traction in the UK.  These are long-term agreements between landlords and their tenants, which provide the tenants with security of tenure, and the option to buy at a date in the future.  The landlord benefits from long-term, stable income and an assured future exit.  As government policy tightens, and investment returns reduce, landlords will demand stable, less volatile income streams, over the longer periods of time.  They will accept lower returns provided they are predictable and stable.  Tenants will remain in the rented sector through extended stages of their lives, and will also demand greater security of tenure, the ability to put down roots, personalizing their homes to their needs. 

We property professionals who work with, support and guide our clients with their property investments, need to be ahead of the curve to innovate and allows tenants and landlords to meet each other’s needs by enabling new models to be introduced. Failure to innovate by landlords, tenants and their agents will undermine the private rented market over the coming 5 years.

Oxford house price inflation loses momentum

House price inflation in Oxford, like other big southern cities in the UK, has seen growth slip from double to single digits. London has reached its lowest level for five years,

The latest Hometrack UK Cities House Price Index revealed growth in London has dropped to 3.5%, a slowdown from the 13% registered in April 2016, giving an average value of £489,400.
Bristol, Cambridge and Oxford, previously top performers, have also seen price inflation slip into single figures, while in contrast the Midlands and northern England are topping the charts.

The average house price in Oxford over the last 12 months is now £407,248.  There have been 3,148 sales transactions over the same period which is 15% down on the same period 12 months earlier.

In comparison, Manchester recorded price growth of 8.4% during April where average prices were £155,000, followed by growth of 7.7% in both Leicester and Birmingham where values are at £164,600 and £152,100 respectively.

Across the top 20 UK cities, price growth has slowed in the past 12 months from 8.7% to 5.3%, with average prices at £247,400.

Oxford Landlord Seminar - Final reminder!

Landlord Seminar - Inheritance Tax Planning for Property Investors

1^st June 2017 at 6pm to 7.30pm at The Oxford Spires Hotel

In association with Martin & Co, Oxford & Twomey Wealth Management

Good afternoon folks,

I hope you are all well.

Just a quick and polite reminder of our upcoming landlord seminar. We have limited remaining places for this, but there are a few, so if you are interested in joining us then please call 01865 812110 or email info@OxfordPropertyBlog.co.uk to reserve your place.

We look forward to seeing you!

Best regards

Richard

What is the ideal ration of bedrooms to bathrooms?

The following article was published by Property Industry Eye.

I thought the following article might interest Oxford Property Blog readers.  I will publish an article later this week on a trend I believe to be important in Oxford - a developing trend for young families for rented family houses.  The article below provides home owners and landlords with an interesting input to decisions about property configuration to appeal to that market.

Direct Line surveyed 100 estate agents across ten of the UK’s biggest cities, concluding that a three-bed home would ideally have an average of 1.8 bathrooms, a four-bed would have 2.6 and a five-bed property would have 3.5.

Almost three-quarters (70%) of estate agents, believed a three-bedroom home should have two or more bathrooms, while 95% said a four or five bedroom property needs to have more than one bathroom, and 43% said a five-bedroom property should have at least three bathrooms.
The research includes estimates from estate agents that an extra bathroom would add 6.8% to the value of a standard three-bed property and 6.2% on to a four-bed.

Using the Hometrack UK Cities House Price Index average value of £208,200, the insurer concludes an extra bathroom could add £12,000 on to a three-bedroom property.

Rebecca Clapham, head of household products at Direct Line, said: “With space in such short supply in homes across the country and the cost of moving sky high, it is interesting to find out directly from the experts what home owners can do to add value to their property.

“A new bathroom can add around £12,000 to the value of a home, which compared to the cost of fitting one, is a significant return and may be a good option for people wishing to improve their home but without the space to add an extra bedroom or improve their kitchen.”

However, the analysis doesn’t seem to acknowledge how changing a bedroom into a bathroom could actually impact a property’s value, so EYE asked some agents.

Aaron Cambden, owner of Nottingham-based Fairview Estates, said: “Bedrooms remain the key focus and are more valuable than an additional bathroom, until you’re looking at property with four or more bedrooms; at this point, extra bathrooms do start to become a more important factor.”
Brendan Roberts, director at London agents Aylesford International, added: “In central London where values are high there is a commensurate expectation that a flat with two bedrooms has two bathrooms, three beds has at least two bathrooms, four beds at least two and preferably three baths, or even four.

“The higher up the price ranges you go, the higher the expectation in both specification and finishes and in the number and luxury of bathrooms, with every bedroom enjoying its own bathroom at the very high end.

“Occasionally, we see something referred to as a Jack ‘n’ Jill bathroom where one bathroom is en suite to two adjoining bedrooms with two doors – one giving access to each of the two adjoining bedrooms. This is quite acceptable, particularly on large family houses.

“I would not encourage anyone to ‘lose a bedroom’, which in most cases would reduce value, but occasionally a flat that hasn’t been modernised for many years may have three beds and only one bath, or is missing an en suite, in which case it might work to change to a two-bed, two-bath layout.”

Oxford to be affected by a fall in student numbers?

The number of students from the EU seeking places at UK Universities has fallen by 7%.  The first fall in over a decade.  A corresponding fall of 5.6% in the number of UK applications for University places seems certain to reduce demand for Oxford's student accommodation during 2017.

The Government's inclusion of foreign nationals studying in the UK within its manifesto promise to reduce immigration to the tens of thousand, seems certain to further discourage and decrease the number of non-UK students coming to our Universities to study.

I believe that the uncertainty caused by Brexit, together with widespread reporting of political emphasis on reducing immigration in the UK, has quickly impacted demand.  Students and their parents have become concerned about the welcome they will receive in the UK, and as a result are looking at alternative opportunities internationally.

Oxford University's Global standing, should mitigate some of this reduced demand for UK Universities, as should Oxford's broader reputation as a City of learning and knowledge.  However, the City will not be immune, and landlord's need to recognise that overall demand seems certain to fall.

Investment opportunity in Yarnton, Oxford

Good afternoon all,

GREAT CLOSE ROAD, YARNTON

I spotted this one for sale in Yarnton because at first it looked vaguely familiar to me and when I looked into the details I found out why!

This property was under my watchful eye for 4 years before it was sold on 18th March 2015 for £180,000. Clearly a popular little place because we only ever had the one tenant who remained for 4 years we had it!

Now on the market for £200,000 with Oliver James, Kidlington this property would fetch £795pcm and £825pcm. Against the current asking price this would give you a healthy 4.9% yield.

BUT!!!

In my humble opinion not at this asking price. Something doesn't quite add up. Most notably is the recent sales history.

On the 14th September 2016 number 33 Great Close Road sold for £155,000. Admittedly a fixer upper which did include needing new everything, but I am not sure this amounts to a £45,0000 increase.

In short and offer would be in order and if agreeable then you would have yourself a cracking little investment and it is clear that they do appreciate very well. Number 40 Great Close Road sold for £158,000 on 19th Oct 2007. 8 years later and through 2 recessions it has still made a tidy profit of £39,500.

Call me for more on this and others on my investment radar (including in house!)

Best regards

Richard

6,564,678 People use Oxford Train Station a year - How does that affect the Oxford Property Market?

It might surprise you that it isn’t always the nicest most picturesque villages around Oxford or the most desirable Oxford streets where properties sell or let the quickest. Quite often, it’s the ones that offer the best transport links. There is a reason why one of the most popular property programmes on television is called Location, Location, Location!

As an agent in Oxford, I am frequently confronted with queries about the Oxford property market, and most days I am asked, “What is the best part of Oxford to live in these days?”,.  Now, the answer can be different for each person – a lot depends on individual factors e.g. the age of their family, their age, schooling requirements and interests etc. Nonetheless, one of the principal necessities for most tenants and buyers is ease of access to transport links, including public transport – of which the railways are very important.

Official figures recently released show that, in total, 9,017 people jump on a train each and every day from Oxford Train station. Of those, 2,811 are season ticket holders. That’s a lot of money being spent when a season ticket, standard class, to London is £5,724 a year.

The bottom line is that property values in central Oxford would be much lower, by at least 3% to 4%, if it wasn’t for the proximity of the railway station and the people it allows access north and south of the City

Rail is becoming increasingly important, as the costs associated with car travel continue to rise and as the roads are becoming more and more congested. This has resulted in a huge surge in demand for rail travel.  

Overall usage of the station at Oxford has increased over the last 20 years. In 1997, a total of 3,064,352 people went through the barriers or connected with another train at the station in that 12-month period. However, in 2016, that figure had risen to 6,564,678 people using the station (that’s 18,035 people a day).  Hence the huge investment in capacity at Oxford parkway station where parallel investment in bus routes to/from Oxford has driven house prices in and around Kidlington, meaning that house price growth continues to track above the average for Oxford.

A property’s location relative to the train station has an important effect on its value and saleability in Oxford. It is also significant for tenants – allowing car-free living to be realistic in a City that wishes to limit car usage.

One of the first things house buyers and tenants do when surfing the web for somewhere to live is find out the proximity of a property to the train station. That is why Rightmove displays the distance to the railway station alongside each and every property on their website – they know it is in the top 5 criteria applied by buyers and tenants alike.  To illustrate this, recently a couple came to me looking for a property 5 minutes’ walk from Oxford station and 5 minutes’ walk to the central shops, restaurants and bars.  They wanted 2 bedrooms, one bathroom and wanted to keep the monthly rent to around £1,000.  In the event, they achieved their perfect location, but had to raise their budget by 20%, reflecting the premium that proximity to the stations carries.  They are now living just off St Thomas Street, just a few hundred yards from the Central station.

House prices hit record highs according to Rightmove

Average UK house prices rose 1.1 per cent to hit a new high in April of £313,655, according to the latest Rightmove house price index.The previous high was £310,471 set in June 2016.

A Rightmove statement says: “While the run-up to an election creates a degree of uncertainty and often a pause in activity, this strong set of figures should help mitigate pre-election jitters.”
The index found that first-time buyer sector is driving growth, up 6.5 per cent annually to a new record of £194,881 on average.

High buyer demand in most parts of the country has helped to propel the price of newly marketed property to record highs and there are signs of a strong spring market with the number of sales agreed achieved at this time of year being the highest since 2007. It remains to be seen what effect the run-up to the snap election will have, though any slowdown in activity will be counter-balanced by the market’s current fast pace.

Until we start to see the promises from this year’s Housing White Paper put into action, the cost of entering the homeownership club will continue to rise which might be great news for homeowners and landlords, but not for first-time buyers trying to break away from Generation Rent.

If you are interested in your property 'numbers' then please give me a call.

Best regards

Richard