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Friday 20 November 2020

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. 

Friday 21 August 2020

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. 

Monday 1 June 2020

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.

Thursday 16 April 2020

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.