How is Oxford performing relative to comparable Cities in SE England?

The average house price in SE England is £323,422, that’s 4.3% compared to the corresponding period 12 months ago.  The average Oxford home is now £420,370 which is up just 2.4%. 

Comparing Oxford to 9 other Cities in the SE of England further illuminates how our City is performing.

The analysis shows that Oxford is not the most expensive City, that accolade goes to Guildford, where prices have increased 4.9% over the last 12 months reaching an average of £452,515 or 7.7% higher than Oxford.  But the best price growth was experienced in Canterbury (7.1%), Chichester (6%) and Winchester (5.4%).  Each of these Cities having experienced an increase in popularity from people seeking to move out of London, whilst retaining good access to the Capital. 

Like Oxford, several Cities have experienced a fall in the volume of completed sales transactions, Oxford is down 2% over the last 12 months, with Guildford, Portsmouth, Reading, Brighton, Milton Keynes and Winchester also experiencing fewer completed house sales.  Only Canterbury and Southampton are in strong growth phases in terms of the volume of completed sales. 

Guildford, Oxford, Reading, Winchester, and Brighton are the top 5 most expensive Cities.  Southampton, Portsmouth, Milton Keynes, and Canterbury continue to offer average prices below £300,000.

The average detached home in Oxford is £609,866 or 18% higher than the SE average.  The average Oxford Semi-detached is £412,182 (22.4% above the SE average), the average Oxford terraced home is £392,061 (41% above SE average) and the average Oxford flat is £285,228 (39.4% above the SE average).

As identified several weeks ago, asking prices for Oxford homes continues to hit all-time highs, however, most properties are selling below asking price with the typical reduction being c5%.  Any review of Rightmove for Oxford will confirm a trend of properties being listed high, with a high proportion being subject to price reductions.  Oxford estate agents bear responsibility for this trend, adopting a policy of list at any price with a view to agreeing on a price reduction later!  This is not serving Oxford vendors well, often delaying sales until a price reduction is secured and placing the property in the wrong Rightmove price banding, meaning potential buyers don’t get to see it as they would had it been listed at the correct price originally.

At Martin & Co we don’t play that game, meaning we sometime lose-out where vendors are ‘dazzled’ by a competitor’s unrealistic valuation.  We know effective sale requires the right people to see the property during the all-important first 4 weeks on market.

And so it begins…Oxford landlords, keep calm and carry on

Analysis published by the property website Home reveals a UK-wide reduction in the number of properties available for rent of 12%.  London is stated to be the worst hit with a fall of 20% in the number of private rented homes.

Home states that there is no evidence yet that the reduced supply has yet resulted in higher yields for landlords.

Regular readers will know that this blog has been predicting unforeseen consequences from Government ant-landlord policy.  The stamp duty surcharge which makes new properties more expensive for landlords to purchase; the progressive reduction of tax relief on mortgage interest payments which reduces the profit landlords achieve from buy to let; and, the forthcoming ban on fees charged to tenants, which is expected to increase costs for landlords are just three examples of recent legislation.  Their combined effect along with daily doom-laden headlines about flat lining property prices, and the reasons why the buy to let gravy train is over is putting pressure on buy to let landlords to sell up and invest elsewhere.

On the face of it, the Home website analysis is another example of doom, adding to the pressure on landlords to sell.  But is it?  Or is it actually an analysis which provides the first evidence that the Government has gone too far?

I have been predicting that the supply of buy to let will fall behind the ever-increasing demand for private rented properties.  Home’s analysis shows that supply of properties is falling across the UK.  With demand for rental properties predicted to rise year on year through to 2025, and with supply falling there can be only one outcome – increased rents.

But, I hear you cry, landlords didn’t increase rents above inflation during the financial crisis, so why will they now?  Quite simply, their costs are being increased due to Government intervention, they feel they are being unfairly singled-out, and will want to protect their financial returns at current levels.  During the financial crisis, landlords recognised they had a responsibility to help struggling families and young adults, now they feel they are being attacked unfairly.

Fortunately, the Government has implemented stamp duty savings and shared ownership models for first time buyers, so those who can’t find or afford rental properties in the future will be able to buy instead.  Well that’s alright then.  Or is it?  No it isn’t.  The Government has done nothing to materially assist young adults to access finance - their student debt, and post-crisis changes to mortgage lending mean few can hope to scrape together the deposit they need, particularly in Southern England hotspots like….let’s think….Oxford!

The cumulative effect of this have serious consequences for young people and families who will not be able to buy and who will increasingly struggle to afford the rent for the homes they require.  We constantly hear from politicians of all persuasions, that the tenant fee ban is ‘progressive’, meaning it will disproportionately benefit lower income people and families.  But the truth is it will not.  The poorest will benefit from a rise in supply of social and affordable housing, and the wealthy will be able to buy property as they always have.  Leaving a broad spread of middle-income people and families being increasingly squeezed, and being forced to spend an ever increasing proportion of their income on accommodation.

As is so often the case, Government have intervened with a popular piece of legislation.  It has been ill-considered, and all attempts by industry bodies and experts has been only selectively embraced.  We all now need to live with the consequences.

So which Oxford landlords will benefit?  Only those who hold onto their properties!  Over the last week I have demonstrated to 5 landlords of Martin & Co the true returns that their properties are generating.  They have ranged from 10% per annum to a whopping 18.5% per annum.  That’s an 18.5% annual return on investment at a tie when base rates remain at historic lows.  And, it is not a risky 18.5% it is a solid, reliable and asset-backed 18.5%.  Why would anyone want to sell such a great investment?

I believe that all Oxford landlords will benefit from consistent and strong return over the coming 5 years.  And, I believe yields will stabilise despite the changes that will increase costs.  Oxford already has too few private rented properties, and fewer landlords are expanding their portfolios.  This will result in rents rising as supply pressures build.  The sensible will hold their nerve, keep calm and weather the short-term storm.

Oxford homes selling below asking price

Both Oxford and London saw property sellers accepting offers on average of 4.8% below the asking price in the first quarter of this year, according to the latest data from Hometrack, up from 2016’s less than 2% average discount in the two cities.

In Cambridge, which had once seen homes go for 1% more than asking price back in 2016, prices were being lowered by an average 3%, followed by Southampton and Portsmouth which saw a similar decrease.

The report says: “Market conditions are weakening in southeastern England but the size of discounts is less severe as prices are adjusting in weaker demand rather than as a result of adverse economic impacts. However, stretched affordability, Brexit uncertainty and multiple tax changes have impacted demand and mean sellers having to accept larger discounts to asking prices.”

I have suspected that evidence of houses selling below their asking prices was due to come through land registry data, and Hometrack’s report confirms this.  Asking prices across Oxford remain high reflecting sellers ambitions, but the market is seeing buyers in the ascendancy and prices achieved are under pressure.

For my Landlord readers, those planning to expand their portfolio should be prepared to make a ‘cheeky offer’ below asking price.   

MP leading a national campaign to mandate electrical appliance testing in ALL rented properties

Government statistics for 2016-17 show that a faulty electrical appliance was the second largest cause of accidental house fires in the UK and  while Scotland adopted new mandatory electrical testing standards for rented properties in 2015 there are no legal requirements for landlords to carry out regular PAT tests in the rest of the UK.  This despite landlords being responsible for ensuring electrical installation and appliances are safe and being open to criminal charges should they fail to prove they took steps to confirm their safety following the death or injury of a tenant resulting from for example a fire caused by an appliance.
At Martin & Co we have advised our landlords to have the electrical installation of their properties certified as safe and for annual appliance testing to be implemented.  Following the Grenfell fire which is believed to have originated from a faulty domestic appliance, scrutiny in this area seems inevitable, and we expect electrical safety certification to become mandatory (as it already is for Gas appliances) over the coming year to 18 months.

The Martin & Co Landlord Spring Seminar

We recently hosted the latest Landlord seminar at which Mr. Chris Bailey who presented on the topic of Capital Allowances.  Yawn right?  Well NO actually, the attendees were without exception variously interested, angry and engaged.  Interested because the apparently dull topic allowed many of them to claim substantial tax benefits.  Angry because their own accountants or solicitors had failed to advise them about this opportunity.  And, engaged because of Chris’s offer to do a no-obligation estimate of the opportunity for them to claim these allowances.  Chris’s team have made over 3000 claims and each one has been successful apparently.

This is particularly of relevance to anyone who has HMO properties or any property let to 2 or more people who make up 2 or more family units e.g. a 2 bedroom apartment let to two unrelated nurses who work at the JR hospital for example.

If any reader is interested in exploring whether this might be of relevance to them, then please give me a call and we can chat it through and I can make a referral to Chris where there might be an opportunity.

Chris went on in the second half of the seminar to outline what he called a ‘hybrid ownership structure’ for rental properties which enabled landlords to offset the adverse financial effects of the wind-down of mortgage interest rate relief and reduce exposure to inheritance tax.  The structure combined the benefits of a limited liability partnership and a limited company.

At face value, this seems too good to be true, but Chris stated that he has set up the structure at least 300 times now and assured the audience it was tested with and approved by HMRC.

Anyone who might be interested in a referral to Chris on the hybrid structure, please let me know.