Can house prices predict 6 Nations success?

The Six Nations Championship kicks-off today with England defending their 2017 title.  But with Scotland and Ireland showing great form in the Autumn, how can we predict the likely victor in 2018?

Well last year the first and second placed teams (England and Ireland) were also top of the leaderboard in terms of annual house price growth.  So it goes without saying, that must be a great way to predict success this year....

Applying this irrefutable logic, I confidently predict that Ireland will win the Championship this year, with England second and Wales third.  While Scotland flattered to deceive in the autumn and will place just fourth ahead of France, with Italy picking up the wooden spoon!

But will Ireland win the Grand Slam?  Well for that we will have to wait and see until St Patrick's Day when they travel to Twickenham for the final and deciding game.

Whatever your colours, this looks to be an excellent and tight Championship, but house prices never lie!

Oxford Property Market and Hammond’s Budget Promise to Build 300,000 more homes

I miss the good old days of George Osborne as Chancellor, with his hardhat and hi-vis jacket. He must have visited every new home building site in the UK with his trademark attire! For the last few years, the nearest Philip Hammond got to donning a ‘Bob the Builder’ outfit was at his grandchild’s birthday party. However, with what appears to be a change in focus by the Tories, they appear to have fallen in love with house building again with the Chancellor’s promise to create 300,000 new households in a year.

Nationally, the number of new homes created has topped 217,344 over the last year, the highest since the financial crash of 2007/8. Looking closer to home: in total there were 320 ‘net additional dwellings’ in the last 12 months in the Oxford City Council area, a respectable increase of 113% on the 2010 figure!  Evidence of a prolonged period of under-investment.

The figures show that 66% of this additional housing was new build properties. In total, there were 211 new dwellings built over the last year in Oxford. In addition, there were 43 additional dwellings created from converting commercial or office buildings into residential property and a further 81 dwellings were added as a result of converting houses into flats.

While these all added to the total housing stock in the Oxford area, there were 15 demolitions to take into account.

I was encouraged to see some of the new households in the Oxford area had come from a change of use. The planning laws were changed a few years back so that, in certain circumstances, owners of properties didn’t need planning permission to change office space in to residential use.

With the scarcity of building land available locally (or the builders being very slow to build on what they have, for fear of flooding the market), it was pleasing to see the number of developers that had redeveloped vacant office space into residential homes in the local council area. Converting offices and shops to residential use will be vital in helping to solve the Oxford housing crisis especially, as you can see on the graph, that the level of building has hardly been spectacular over the last seven years!

Now we have had the autumn budget, Theresa May and Philip Hammond have set out their stall with housing as their key focus, including more funding for the supply side and an injection of urgency into the planning system.

The biggest question is, just where are the Government going to build all these new houses? Whilst the apparent new focus on the housing market by the Government is good news for all homeowners and buy to let landlords, in the short term, demand still outstrips supply for owner-occupied and private rented homes and that will mean continued upward pressures on prices for buyers and on rents for tenants.

Tenant right to sue landlords

The Ministry of Housing, Communities & Local Government yesterday announced that it will support a Private Members Bill proposed by Karen Buck MP, which would enable tenants in England and Wales to take legal action against their landlord if their rental property is in poor condition. Secretary of State for Housing Sajid Javid MP has backed Homes (Fitness for Human Habitation and Liability of Housing Standards), which is expected to have its second reading on Friday. The bill states: that all landlords (both social and private sector) must ensure that their property is fit for human habitation at the beginning of the tenancy and throughout; and where a landlord fails to do so, the tenant has the right to take legal action in the courts for breach of contract on the grounds that the property is unfit for human habitation As part of attempts to drive out rogue landlords and raise property conditions, the government has already introduced a range of powers for local authorities. April 2018 will see both the introduction of a database of rogue landlords and property agents convicted of certain offences and banning orders for the most serious and prolific offenders. I believe that this future legislation is targeting genuine rogue landlords, however, landlords should keep an eye on how this develops.  There is already a discernible trend of tenants being more willing to complain, raising complaints with The Property Ombudsman, even where the causes of their complaint (often damp and mould related) is caused by condensation resulting from their own way of living.  Proactivity is the order of the day - provision of advice to rectify condensation, treat mould and manage ventilation and inspection to monitor its implementation is key.

Young proferssionals are unable to buy their first home in Oxford – Are the Baby Boomers and Landlords to Blame?

Talk to some Oxford 20 something, for whom home ownership appears a vague dream, and they are vexatious towards the Baby Boomer generation and their pushover walk through life, their free university education, their eye watering property windfalls, their golden final salary pensions and their free bus passes.

If you bought a property in Oxford for £25,000 in first quarter of 1977, today it would be worth £549,429, an increase of 2097.7%.

But to blame the 60 and 70 year olds of Oxford for that seems a little unfair. The mature generations joined the property party in the 1970’s and 1980’s when they were allowed to take out huge mortgages, protected by the knowledge that inflation would corrode the real value of the mortgage, increase property prices, while boosting wage growth enhancing their ability to repay.

Unlike Government, neither do I blame the multitude of Oxford buy to let landlords, buying up their 10th or 11th property to add to their buy to let portfolio. They too, merely reacted to the peculiar historic inducements of the UK property market.

Surely someone is to blame?

Margaret Thatcher and Nigel Lawson are also good people to blame - selling off millions of council houses at knock-down values and delaying ending of the MIRAS tax relief in 1987. The Blair/Brown combo doubled stamp duty in 1997 and again in 2000, which, as a tax on property transactions, precluding a more equitable distribution of current housing stock. And, our current Government has had plenty of opportunity to change the stamp duty rules to incentivise those mature Oxford house movers to downsize, but have failed to act.

It’s easy to think the only reason that hundreds of first time buyers have been priced out of the Oxford housing market is because of private landlords. Yet, I believe they are undervalued.  With first time buyers struggling to save for a deposit, if it weren’t for those landlords buying up homes we would have a bigger housing crisis than we have today. Since the global financial crisis of 2008/9, local councils have cut services, and haven’t had enough money to build new homes.  Homes that were provided to Oxford instead by buy to let landlords helping to reduce the scale of the current crisis.

657 homes are being bought by buy to let landlords each year in the Oxford City Council area when otherwise they might have been available to other buyers.  But at a time when the current national average deposit is £51,800, most young people are simply unable to meet lenders’ demands. And, homes bought by local landlords are not standing empty, instead they equate to 4,596 of homes for local people, most of whom either see renting as a preferred option given the flexibility required by the early years of their professional lives, or accept that they cannot yet meet lender demands for deposits. 

Oxford Rents Set to Rise to £2,338pm in Next 5 Years

It’s now been close to 18 months since annual rental price inflation in Oxford peaked at 3.4%. Since then we have seen more humble rent increases. In fact, in certain parts of the Oxford rental market over the autumn, we have seen some slight reduction. So, could this be the earliest indication that the trend of high rent increases seen over the last few years, may be running out of steam?

Well, possibly in the short term, but in the coming few years, it is my opinion that Oxford rents will regain their upward trend as demand for Oxford rental properties outstrip supply, and this is why.

The only counterbalance to rental growth would be an increase in rental stock (i.e. the number of rental properties in Oxford). However, because of the Government’s new taxes on landlords being introduced between 2017 and 2021, buy-to-let has (and will) be less attractive in the short term for certain types of landlords (meaning fewer new properties will be bought to rent).

Interestingly, countless market experts assumed at the start of 2017, that the number of rental properties would reduce throughout the year. The assumption being as the new tax rules for landlords started to kick in, landlords would look to serve notice on tenants, sell up and invest their capital elsewhere.

Anecdotal evidence suggests, confirmed by my discussions with fellow property, accountancy and banking professionals in Oxford, that Oxford landlords are actually either re-mortgaging their Oxford buy-to-let properties instead or converting their rental portfolios into limited companies to side step the new taxation rules.

The sentiment of many Oxford landlords is that property has weathered economic shocks well in the past, and there is something inheritably understandable about bricks and mortar – compared to the voodoo magic of the stock market and other exotic investment vehicles like debentures and crypto-currencies.

Remarkably, there is some good news for tenants, as the Government recently published the draft Tenants’ Fee Bill, which is designed to prohibit the charging of tenants lettings fees on set up of the tenancy. However, looking at evidence in Scotland, I expect rents to rise to compensate landlords, thus hammering faithful tenants looking for long-term tenancy agreements the hardest. This growth will be on top of any usual organic rent growth.  It really is swings and roundabouts!

Rents in Oxford over the next 5 years will rise by 9.2%, taking the average rent for a Oxford property from £2,141 per month to £2,338 per month.

Rents in Oxford over the last 12 years have risen by 21.5%. I don’t expect the future rise to be a straight-line either, because I have to take into account the national and local Oxford economy, demand and supply of rental property, interest rates, Brexit and other external factors. Please see the graph for my projections

In the past, making money from Oxford buy-to-let property was as easy as falling off a log. But with these new tax rules, new rental regulations and the overall changing dynamics of the Oxford property market, as an Oxford landlord, you are going to need to work smarter in the future and keep abreast of information, advice and opinion to hand on the Oxford, Regional and National property markets.

Housing front and centre in 2017 Budget, but what will it mean for Oxford?

The Budget has been announced and analysed, so far with relatively few unannounced ‘nasties’ having been found.  It is welcome that housing is receiving the attention it deserves, recognising: the challenge faced by first-time buyers; that too few new houses are being built; and, that renting is now a preferred alternative for many people.  But, are the Chancellor’s plans going to serve Oxford and the County well?

No Stamp duty for first-time buyer for the first £300,000 spent

Oxford is well known as having one of the largest gaps between average property price and average salary anywhere in the UK.  With one-bedroom apartments in central Oxford selling for £385,000 or more, even without stamp duty, most first-time buyers can’t afford to live in the City.  But places such as Littlemore, Greater Leys, parts of Marston and Barton do provide realistic opportunities, particularly where a shared ownership option is available.

But, the changes to stamp-duty do not benefit those looking for their second home, who need to vacate their starter homes to make way for first time buyers.  House building takes time, and consideration should be given to a tapered reduction in stamp duty benefitting 2^nd and 3^rd time buyers encouraging them to move.  Only then, would these measures really benefit Oxford’s market where 97% of sale transactions are within existing housing stock.

100,000 new homes for Oxfordshire

As part of plans to connect Cambridge and Oxford, one million homes are planned between these great University Cities.  Of those, 100,000 are expected in Oxfordshire.  Oxford must fight, and fight hard for the lion’s share of those new homes.  Without them, the local property market will remain supply constrained.  With Oxford Parkway train station, North Oxford – Kidlington, Marston and Wolvercote present significant opportunities to build with easy access to the City centre, and transport links to the Midlands and London.

A consultation on longer tenancies

The Chancellor announced a new consultation on how to encourage longer tenancies.  This will bring the total housing consultations to 16!  Oxford, like most places in the UK is experiencing a trend towards longer tenancies.  Once student tenancies are removed from the average tenancy length is between 24 and 30 months.  Longer tenancies benefit both landlord and tenant where each is satisfied with the other (the majority of tenancies).  This suggests to me that no consultation is required to stimulate a trend that is already occurring under current arrangements.

It is great that housing is getting the Government attention it deserves, but our local authorities must seize the day, facilitate the planning process and secure their fair share of the new funds.

Oxford is the 3rd least affordable place to buy a home

House prices in the capital are now 14.5 times the earnings of an average Londoner, according to Hometrack, hitting the highest level on record. London was followed by Cambridge, where the average property is 14.3 times earnings, Oxford (12.6) and Bournemouth (10.1).

Last week’s budget confirmed Government plans to link Cambridge and Oxford by road and rail, with one million new homes planned along the arteries created. 

Oxford’s achieved prices for houses sold over the last 12 months is 6% up on the previous period according to Land Registry data, despite a 17% reduction in the number of completed transactions.  Whilst that is welcome news for current Oxford property owners, it points to continued supply constraint.  Oxford’s second-time buyers – young couples looking to trade up as they plan a family, can’t afford to move, meaning that first-time buyers face an acute shortage of available, affordable properties.  The new stamp duty incentive will not solve Oxford’s supply constraint.

New-build houses account for only 3% of available homes, with the majority being larger properties targeting already affluent Oxford house buyers.  Less than 1% of starter homes are new build.

Oxford City Council and Oxfordshire County Council must free-up development land and fight to secure above a fair share of the one million new homes planned.  The current target of 100,000 new homes is insufficient unless they are centred in Oxford or within easy commuting range.

Newspaper headlines have announced the demise of buy to let in Oxford, predicting a ‘great sell-off’ of private rented property.  To date, this has not materialised, and given the 6% increase in values, it should not be a great surprise that savvy landlords have held onto their assets.  However, private investors are not making new investments due to the stamp duty surcharge imposed on 2^nd homes. That should worry young people looking to live and work in Oxford.  There is already an under-supply of good quality rental properties in Oxford, and many more will be required given how long new build homes take to come available.

Increasingly private landlords are recognising the affordability benefit offered by villages outside Oxford.  Kidlington, Wolvercote and Marston continue to offer value for money, and rental yields above 4% in the first year of ownership.  Kidlington particularly has benefitted from the opening of Oxford Parkway station and regular bus routes to Oxford.  Kidlington is now recognised as a destination for couples and young families leaving London but wishing to retain easy commuting access.

Captial gains tax hike for BTL comapnies hidden in the budget

The BBC reports that there is a Capital Gains Tax measure buried in the small print of the Budget which is likely to hit companies that own buy to let properties.

Individuals who own more than one property - for buy to let or other purposes - pay 40 per cent CGT on the total the property appreciated when they come to sell it. Companies, on the other hand, have been allowed to deduct the amount of that price rise that was due to inflation. 

The BBC gives the example that if a flat was purchased for £100,000 for the purposes of letting out, and was 10 years later sold at £200,000, the individual who owned it would have to pay £40,000 CGT - that is, of course, 40 per cent of the £100,000 profit.

However, if a company purchased the same property for £100,000 and inflation had been at three per cent for that 10-year period, inflation would have accounted for £34,000 of that price rise.  

Then the company would only pay 40 per cent CGT on the rest of the rise - so it would be 40 per cent on the remaining £66,000 price rise. Therefore in that case the CGT would be £26,400 rather than £40,000.

However, the BBC reports that it now appears that from January 2018 that discrepancy will be eliminated. 

The change will only affect price rises from January of next year, so companies will not pay extra on the gains they have already made.

The BBC says property is not the only asset this new tax hike affects, but comes on top of a series of measures in recent years which can be seen as attacks on buy to let.

In the past 18 months, many individual buy to let landlords have incorporated, setting up companies owning their investment properties in a bid to reduce the liability of mortgage interest tax relief, which is being phased out for landlords.

What do Oxford’s landlords, and tenants need from the budget this week?

As usual there is no shortage of sensational headlines about the importance of the budget for the Government, and for key Departments including Health, Work & Pensions and Defence.  However, for Oxford’s tenants it is the headlines about house building that are the most important, and Oxford’s embattled private landlords it will hope that the budget doesn’t pile further pressure and expense on them.

In Oxford, whilst prices achieved for sold houses has continued to rise (with most recent data confirming a 6% rise in achieved prices over the last 12 months when compared to the prior year), the total number of transactions (the number of houses successfully sold having been put on the market) has fallen by 17% to just 2,702.  It is this statistic that should worry everyone.  I believe that the fall in the number of transactions is in part due to lower levels of house purchase by private landlords, which in turn means that future supply of new rental properties is not growing to keep pace with demand.

Regular readers of my column will know that I have identified a growing level of demand in Oxford for small family homes for rent.  As ‘first-time’ tenants start to plan their families and out-grow their homes, they have a requirement for 3-bedroom properties in areas with nursery places, good transport links and easy access to supermarkets and other shops.  In Oxford, this is currently under-supplied in the rental sector, with many suitable properties instead targeting multiple tenants rather than families.

Without such provision, and with 3 bed properties remaining prohibitively expensive to buy, these young families will either need to look outside of Oxford or look for affordable new build within Oxford.

Over the last 12 months in Oxford just 82 new build properties were sold, that’s just 3% of total transaction in the same period.  Of those new build, 51 were larger detached properties and just 12 the terraced or semi-detached homes which tenants with young families are most likely to target.

This double-whammy - a lack of new investment by Oxford’s private landlords and a dearth of suitable new build - will create a pinch-point for Oxford’s private renters at a time when demand for rental properties has never been higher.  The lack of supply is clearly responsible for house prices remaining buoyant at a time when total transactions have fallen so dramatically.  Oxford is a supply-constrained market, and as a result as landlord costs increase they are likely to result in higher rents.

Following the introduction of a stamp duty surcharge for owners of multiple properties, and the restriction on landlords’ ability to off-set the costs of borrowing when calculating their income tax, the Government has no fewer than 15 ongoing consultations in parliament which could further affect the private rented sector, but not help to deliver more new homes that Oxford so desperately needs.  Instead, they will make landlord compliance more difficult, increase the costs that landlords’ have to bear and, further discourage good ethical landlords from investing further in Oxford at a time when their investment is most needed.

Top slice mortgages may help Oxford investors

Which? – the consumer organisation - says a handful of buy to let mortgage lenders have found a way of helping so-called ‘portfolio landlords’ to borrow more than they might have expected under tough new regulations.

Last month the Prudential Regulation Authority tightened the criteria which individual lenders had to use when handling applications from portfolio landlords - that is, those with four or more buy to let properties. 

But now the Which? Reports that “a handful” of lenders offering ‘top slicing’ deals, which allow landlords with low rental yields to make up their shortfall through other income. 

“Top slicing takes a landlord’s personal income, such as their salary or pension income, into consideration when assessing their affordability, rather than just looking at the profitability of their property portfolio. Top slicing is good news for landlords buying higher value properties which might have lower rental yields, as it allows them to use external personal income to bridge any shortfall” says a statement from Which? 

With Oxford prices rising again over the last 12 months by around 6%, and average Oxford homes costing £414,817, Oxford offers lower rental yields over the initial 3 to 5 years following purchase.  As a result, ‘Top slicing’ products would appear highly relevant for landlords aiming to increase their investment in Oxford property.

The consumer group says currently the lenders who undertake this are Aldermore, Barclays, Bluestone, Clydesdale Bank, Coventry, Mansfield, Metro Bank, NatWest, Vida and Virgin Money.

However, because of the restrictions imposed on most lenders by the new PRA criteria, some 14 companies have pulled out of the portfolio landlord market completely, says Which? This includes Santander, the TSB and the Post Office.

Kidlington – Reasons to be cheerful whether you are buying or selling

With its easy access to London and the Midlands via Oxford Parkway train station, and public transport links to Central Oxford, Kidlington is now one of the top 5 areas in the UK where houses are bought by City leavers.  According to a recent study, 50% of all property transactions completed are now to people moving out of a City, with London being a popular source location.



Over the last 12 months close to 95,000 people have decided to move out of London, up 16% on 2016, with 30% of leavers being between 20 and 29 years of age.



Many of these movers are cashing-in on the value of their City properties, and moving to more rural and cheaper locations.  With many using the move to change their work life balance, while others being motivated by ease of commuting links to where they have moved from.



Key attractions are a sense of community, period properties and access to good schools.  Many movers are shunning the traditional commuter towns where everyone is there for commuter convenience for authentic towns where people choose to live for a variety of reasons.



The slowing market in London presents a challenge for Kidlington and other popular places with City leavers.  There are currently 20% more homes for sale in London that at this time last year.  This is an example of how the Oxford market is affected by the Capital, and has contributed to the fall in transaction volumes across Oxford.

Many City leavers choose to rent initially in their chosen location, to enable them to make the move more quickly, confirm their preference and look for suitable properties to buy. 



So, how is the local Kidlington market performing?  Well, transactions over the last 12 months are down by 5% on the previous year at 372 transactions in total.  Of those 13% were for flats at an average price of £210,274, and just 4% of the market was new build.  Terraced houses averaged £306,720; semi-detached £349,353; and, detached homes £481,612.  The most expensive flat sold over the last 12 months changed hands for £382,950 and the most expensive house for £1,405,000.  Overall across the last 12 months prices have held firm making Kidlington look like better value when compared against the rest of Oxford where prices are up 6% on the prior 12-month period.  On average a home in OX5 is 16% cheaper than the average for Oxford as a whole, and accounts for around 12.5% of Oxford total transactions.



Many City leavers rent initially in their chosen location, enabling them to make the move more quickly, confirm their preferences and look for suitable properties to buy. 



Recognising this source of demand is important when marketing your Kidlington property, which also remains popular with families struggling to trade-up to larger properties in Oxford itself.

Kidlington is one of 10 areas in the UK where city-leavers are buying property

With its easy access to London and the Midlands via Oxford Parkway train station, and public transport links to Central Oxford, Kidlington is now one of the top 5 areas in the UK where houses are bought by City leavers.  According to Hamptons, 50% of all property transactions completed.

Over the last 12 months close to 95,000 people have decided to move out of London over the last 12 months, up 16% on 2016, with 30% of leavers being between 20 and 29 years of age.

Many of these movers are cashing-in on the value of their City properties, and moving to more rural and cheaper locations.  With many using the move to change their work life balance, while others being motivated by ease of commuting links to where they have moved from.

Key attractions are a sense of community, period properties and access to good schools.  Many movers are shunning the traditional commuter towns where everyone is there for commuter convenience for authentic towns where people choose to live for a variety of reasons.

The slowing market in London presents a challenge for Kidlington and other popular places with City leavers.  There are currently 20% more homes for sale in London that at this time last year.  This is an example of how the Oxford market is affected by the Capital, and has contributed to the fall in transaction volumes across Oxford.

Many City leavers choose to rent initially in their chosen location, to enable them to make the move more quickly, confirm their preference and look for suitable properties to buy.  Around 5% end up reviewing their decision, moving back to the City they have left.  But, for the majority it reinforces their decision and enables them to find the right long-term home.

Recognising this source of demand is important when marketing your Kidlington property, which also remains popular with families struggling to trade-up to larger properties in Oxford itself.

What is the next big trend in Oxford rentals

Over the last few weeks I’ve been asked on three separate occasions by Oxford buy to let landlords what trends they should be aware of when considering their next buy to let investment in the city.

One trend that is certainly emerging in Oxford is rising demand for larger properties, by couples with young or growing families.  Typically, these couples are already renting, but out-growing their one or two-bedroom property, and targeting more space to grow into.  They are members of a growing group of young parents who have always rented their homes, and who either prefer to continue to rent, or who remain priced-out of the Oxford market.

Looking at Oxford’s housing mix, shows that 3 and 4-bedroom properties account for just over 50% of all Oxford properties, suggesting that availability shouldn’t be a problem.

However, this is a highly competitive sector of the market.  The most active purchasers of Oxford 3-bedroom properties are in their late-20s or early to mid-30s, they may already own their own home or this might be their first purchase, they are parents with growing families or couples planning to start a family soon. Many are seeking a perfect balance of access to decent primary schools, commutability, access to an open space and general liveability by which I mean access to supermarkets, pubs and restaurants. For landlords looking to buy 3 and 4-bed Oxford properties, they face stiff competition from these 20/30 something families, making the three-bedroom Oxford home massively in demand, often attracting spirited offers and selling within weeks of listing.

This mix of homebuyers and landlords is creating a pressure point in the Oxford property market, which reduces the availability of 3 and 4-bedroom properties for young families with the same nees as those described above, but who either have to rent or prefer to rent rather than buy.  The competition for the purchase of these properties is maintaining pressure on prices, which in turn applies pressure to rental yields making some buy to let landlords think twice about investing in this in-demand sector of the market.  I firmly believe that demand will outstrip supply over the coming years and that as a result rental yields will improve progressively, making early investment in this sector attractive.  I also believe that this sector will be less impacted by uncertainty resulting from domestic politics and Brexit, given that demand will be dominated by UK nationals and long-term residents.

Next week I will examine the costs associated with buying an additional bedroom in the Oxford market.  For renters, however, the challenge is one of availability. 

If you are an Oxford landlord, please do call me and I will show you areas with decent returns where you aren’t in so much competition with young Oxford family homebuyers to exploit this future growth market.

Oxford Landlords – inform yourself about the new Buy to let mortgage lending guidelines

Oxford’s buy to let investors with multiple properties in Oxford alone could risk being turned down for future mortgages under the restricted guidelines being introduced in two weeks’ time.  Many Oxford landlords are unaware of the changes being introduced and may be well advised to consider remortgaging before the new rules come into force.

The new Prudential Regulation Authority (PRA) guidelines to mortgage lenders apply to those borrowers with four or more buy to let properties anywhere in the UK.  In future, Oxford’s ‘portfolio landlords’ - will have to show full financial information for every property in their portfolio, rather than simply providing top-line profits. 

What this means in practice is that, among other factors, lenders will look at the equity in each property, individual rental profits (‘yields’) and the geographical spread of a portfolio i.e. the extent to which the portfolio is exposed to just Oxford’s local property markets rather than Oxford and other markets with different market characteristics? The changes seem likely to make borrowing additional funds more time consuming, especially for Oxford landlords with larger portfolios just imagine having to assess forty properties individually when trying to refinance mortgage debt. It could also result in some of Oxford’s landlords being turned down for new finance even though their portfolio is unchanged from when they last raised finance. This seems likely to be especially the case where the landlord is heavily mortgaged or overly exposed to the Oxford market alone.

Because each lender has been allowed to interpret how the new requirements should change their lending processes, there is growing concern in Oxford’s buy to let community over the implementation of the new guidelines and the extent to which lenders are prepared and how consistently the new guidelines are introduced.

The changes, which aim to ensure Oxford borrowers are not over-exposed if economic conditions deteriorate, or if the local market stalls, build on ‘stress tests’ recently introduced by lenders who now demand rental income meets at least 125 per cent of mortgage costs. Lenders also already check that borrowers can afford to repay the loan regularly even if interest rates soar to 5.5 per cent.

Portfolio landlords in Oxford like their counter parts elsewhere are being targeted by the PRA because it has found that arrears rates increase as portfolio size increases. I expect the impact of these changes for Oxford’s portfolio landlords to mirror the impact of the 2015 Mortgage Market Review for owner-occupiers.  Mortgages will be tougher to secure particularly for landlords who do not prepare in advance and/or are solely exposed to Oxford property. Buy to let landlords whose portfolio is geographically concentrated risk being turned down for future finance, and should use the next two weeks to speak with their mortgage broker about refinancing, to understand the new approach, and possibly to secure new funds under the current lending assessment processes.

As mortgage interest rate relief is progressively phased out over the coming 3 to 4 years, and with the Bank of England providing clear direction that interest rates will most likely rise this calendar year, it is important that Oxford landlords do all they can as early as possible to reduce the cost of finance to off-set the increased costs impacting their business.

Oxford rent rises predicted after brief lull

Rents in Oxford for new tenancies fell by 0.4% in the last 12 months (i.e. not existing tenants experiencing rental increases from their existing landlord). When we compare that current rate with the historical rental inflation in Oxford, an interesting pattern emerges:

·       2016 - Rental Inflation in Oxford was 5.1%

·       2015 - Rental Inflation in Oxford was 9.4%

·       2014 - Rental Inflation in Oxford was 3.2%

The reason behind this change depends on which side of the demand/supply equation you are looking from. On the demand side (from the tenants point of view) there is the uncertainty of Brexit and the fact that salaries are not keeping up with inflation for the first time in three years. Critically, this means tenants have less disposable income to pay their rent. As an aside, it is interesting to note that nationally, rent accounts for 29% of a tenant’s take home pay (Denton House).

On the supply side of the equation (landlords point of view) Brexit also creates uncertainty. However, the biggest issue was a massive upsurge of new rental properties coming on to the market in late 2016, caused by George Osborne’s new 3% stamp duty tax for landlords in the first part of 2016. This meant a lot of new rental properties were ‘dropped’ on to the rental market all at the same time. The greater choice of rental properties for tenants curtailed rental growth/inflation. A slight softening of Oxford property prices has compounded this.  Figures from The Bank of England suggested that first time buyers rose over the last 12 months as some were more inclined to buy instead of rent. Together, these factors played a part in the ongoing moderation of rental growth.

The lead up to the General Election in May didn’t help: after all people don’t like doubt and uncertainty.  Whether it be ‘hard’ or ‘soft’ Brexit negotiations (and with the Election result the Tories might have to be ‘softer’ on those negotiations) the simple fact is, we aren’t building enough properties for us to live in. Both in Oxford, the South East and the wider UK, long-term population trends imply that rents will soon once again be growing faster than inflation again. Look at the projections by the Office of National Statistics.

Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner. As the population grows in Oxford, any restriction to the supply of rental properties (brought about by poor returns for landlords) cannot be in the long-term best interest of tenants. Simply put, rents must go up!  But, with rents already accounting for 29% of a tenants’ disposable income, the ability for most tenants to absorb a rent increase does exist.  It is for this reason, that I believe Government policy which is increasing costs for landlords (removal of mortgage interest rate relief; stamp duty surcharge; and, ban on fees charged to tenants) is short-sighted and poorly considered.

What is happening with Oxford house prices?

In my article last week, I promised to widen the net of my research to see whether there was a noticeable trend in the way house prices around Oxford are currently performing.  The table below summarises the findings of my research, using Rightmove data for houses that sold and were listed over the last 12 months.

The recent reports by the Royal Institution of Chartered Surveyors (RICS) states that the slowdown in the housing market is spreading from London to other parts of SE England.  It also observes that the most expensive homes are particularly likely to have seen cuts in asking price before being sold.  RICS points to a series of changes to tax policy which has particularly impacted buy to let investment, and a continued lack of new-build properties weighing on the market.  Other commentators have pointed to stamp duty discouraging older owner-occupiers from down-sizing as another drag on house availability.

Looking at Oxford specifically, there is evidence that the most expensive parts of Oxford are under-performing.  The notable exception being Cumnor, where some new build and strong activity have impacted the overall trend for that part of town. Whilst overall, there is a stronger trend of house price growth in the parts of Oxford which are below City average values, it is a very mixed picture.  Headington, Blackbird Leys and Greater Leys have out-performed the City average whilst Wolvercote, Marston and Cowley are close to the overall average, with Botley and Barton performing particularly poorly when compared to the prior 12-month period.

Of course, when looking at data like this it is important to consider the local factors that could have affected housing prices.  For example, Wolvercote has recovered from a negative position 12 months ago, reflecting the completion of road works that had previously dragged on prices.  Barton, may well be experiencing some drag due to the new houses coming on stream, causing people to delay their move waiting for the new stock to come on stream, or avoiding the area due to the works.

Overall, there is some evidence that it will be the top-end of the property market in Oxford that will feel the pinch earliest.  And, as I have commented over the last several months, Oxford is experiencing a 19% reduction in house sale transactions, and continues to suffer from an under-supply of new build homes.  There are some vendors who are also disregarding the price sensitivity in the market, holding-out for unrealistic offers, in a market that has become far more price sensitive.

Across these parts of Oxford the average increase inhouse prices over the last 7 years is 14.9% which rises to 18% if Boars Hill is removed from the calculation.  Oxford as a whole has averaged 20% increases since 2014.

In summary, it is far too soon to panic, but vendors need to be realistic with the price they offer making sure they benchmark well with comparable properties on the market.

Buy to let mortgage rates continue to fall

Research from independent market monitor Moneyfacts shows that the average two-year fixed BTL rate has fallen by 0.31 per cent in one year, and even though the pace of the fall has slowed in recent months, the market has now recovered from the significant drop in products that was seen at the start of this year.

The number of BTL mortgage products now available has risen from 1,408 in January this year to 1,610 now - a rise of around 15 per cent in just six months.

As regular readers will know, I have been encouraging Oxford buy to let landlords to consider re-mortgaging for several months now.  The market for BT mortgages has been improving with the range of products increasing and the level of interest rates falling.  At a time when landlord costs have been rising, and look set to continue to rise, this is a way for landlords to reduce their monthly costs and lock-in the historic low interest rates for years to come.

Too many Oxford landlords have a misplaced sense of loyalty to their current lender, instead of grasping the opportunity to look after their own interests.

For any reader interested in discussing the opportunities for re-mortgaging I would be happy to make a referral to a registered and regulated mortgage broker for a no-commitment telephone assessment to determine whether you could save money by re-mortgaging.

Oxford is a favourite place for people moving out of London

The number of people leaving the capital has reached a 5-year high, with net departures to homes elsewhere in the UK reaching 93,300 people in the year to June 2016 – an increase of more than 80% on five years previously according to the ONS.

Apart from people in their 20’s there is a net outflow across all age groups with thirty-somethings being most likely to look for somewhere more affordable to buy a family home.

Those who live in the Capital’s richest boroughs are more likely to move to more affluent areas.  People in Kensington and Chelsea tending to move to Cambridge; Westminster residents heading to Oxford and those in Hammersmith and Fulham moving to Elmbridge in Surrey.  Other popular places for relocation include St Albans and Slough.

It is perhaps no surprise that the popular new places remain within communing reach of London, and have vibrant community, social and cultural attractions.  As I have predicted in this blog, these people are looking for family homes or 3 beds or more, ease of access to train and road links to London, and proximity to open spaces, supermarkets and social venues. I expect to see these properties to increase in popularity for both buyers and renters over the coming 2 or 3 years.

Is the Oxford Property Market stalling?

Everyday thousands of column inches are being used to make comment on the UK housing market.  As is usually the case, the headlines are overwhelmingly full of foreboding – after all good news doesn’t sell!  But, what is the true picture for Oxford?

Oxford remains the UK’s least affordable city for residents to buy a house, with an average house costing over 16 times average income.  So Oxford is prime for the building of new homes right?  Well, no!  Over the last 3-month period new build homes in Oxford accounted for just £1.27m of £217m value of homes sold in the City – that’s just over half of 1%!  And, therein lies the real challenge for Oxford, which now has 45,000 people commuting daily many traveling because they can’t afford to live closer to their workplace in the City.  This in turn is causing road congestion, rail congestion and long bus journeys.  It is driving a new growth segment in the Oxford rented sector – that being professional Houses in Multiple Occupation (HMO) – shared houses for young professionals who can not afford to buy or rent their own property, but no longer want to live like they did as a student.

So, house sales are booming then?  Well, no!  The table below shows data for key Oxford post codes, over the last 12 months, compared with the 12 months previously.  The analysis shows that whilst prices have continued to rise for the most part, transaction volumes a down significantly, suggesting that more people are staying put, with fewer people being able to buy a home in the City.  To date, prices have held-up strongly, because the reduced supply is balancing-out any reduced demand for new homes.  However, in April Hometrack UK City index reported that Oxford had slipped into negative house price growth, with the May 2017 report just tipping into positive territory at 1.6% year on year (YoY) growth vs. 8.2% YoY growth in May 2016.

Postcode/Town	Average value (£)	% change in value	Number of transactions	% change in transactions
OX1	460,407	12%	214	-48%
OX2	538,814	2%	490	-29%
OX3	406,212	7%	372	-37%
OX4	345,006	6%	578	-27%
OX5	344,416	-1%	366	-9%
Bicester	329,745	6%	1,077	-13%
Banbury	292,016	7%	2,756	-16%
Abingdon	328,638	6%	3,873	33%
South East England	307,611	9%	30,325	-51%

An important part of the Oxford property market is accommodation for the City’s 30,000 students.  With Universities announcing increases in tuition fees, and a net reduction of 4% in student applications with applications from the EU down over 5%, the City may experience a surplus of student accommodation, reversing the under-supply of recent years.  Together with the ban on fees charged to tenants by landlords and their agents which will be introduced by the Government, the City’s student landlords are certain to experience greater competition when attracting tenants, and an increase in costs.  The best way for such landlords to compete will be to invest in their properties offering better fixtures, fittings and décor, reflecting feedback from their agents about what students demand.  For many, it may be more sensible to re-fit and re-configure their property to appeal to the growing market for professional sharers mentioned above.  This sector demand en-suite facilities, large double bedrooms and well fitted, large communal kitchens.

In summary, Oxford prices have held-up to date, but show signs of weakening.  Oxford remains top of the charts for unaffordability, and the continued lack of new-build affordable homes is pushing demand to outlying towns and villages.  Demand for rented accommodation is changing, and the City is suffering reduced demand from foreign nationals wishing to live and study in the City.

It’s time for Our Civic, Business and Academic leaders to step-up to the plate

There is now little doubt that UK domestic political uncertainty is combining with Brexit to undermine demand for homes across Oxford.  It is time for Oxford to take a stand and make clear at home and abroad that Oxford is open for business and remains a welcoming, international city of academic excellence and knowledge based services, as well as a European centre for manufacturing and automotive excellence.

The recent UK election was widely expected to be a time-limited period of uncertainty, which, like previous elections, would create a short-term softening of demand for rented accommodation and create a drag on new homes listed for sale.  It now seems certain that the sense of uncertainty will continue as parliament wrestles with the implication of a government with no overall majority in the House of Commons.

The uncertainty created by the UK election result, seems likely to exacerbate press attention on Brexit both in the UK and internationally.  To date, the press has highlighted immigration as the central issue, with much commentary creating an impression that the UK is no longer a safe nor welcoming place for foreign nationals to come to study and work.  For Oxford, this has unquestionably undermined demand from foreign nationals wanting to live, study and work in our great city.  Nationally demand for University places from the EU has fallen by 7% compared to last year.  Over the same period, demand for places from the UK has also fallen by 5.6%.  This ‘double whammy’ is evident in Oxford by the number of rental properties that are available in areas typically popular with foreign students and downward pressure on rents that have typically increased at 2 to 3% per annum.

With Brexit certain to dominate the political headlines over the coming 18 months, places that depend on their international reputation as centres of excellence for learning, knowledge-based services and manufacturing must take direct responsibility for communicating their multi-cultural values, their openness and their desire for sustained immigration for work and learning.

Oxford must take a leadership position in this, reflecting its pre-eminent position as one of the World’s best academic centres of learning.  It is time for our civic leaders to step-up and take control of Oxford’s narrative.  The leaders of our big businesses and Universities must take every opportunity to jump on planes and promote the unique, welcoming environment for which is Oxford is rightly known around the world.  The City’s international alumni need to be called-on to ensure our positive message is heard around the World.

On 23^rd June 2016 Oxford voted by 70% to remain in the EU.  As a City dedicated to excellence, with a rich contribution to politics, science, the arts, medicine and engineering globally, it is incumbent on us all to make our voices heard, making clear that Oxford is and will remain a place of inclusion, security and culture for people from around the world.