Slowing Oxford Property Market? Yes and No!

Being a buy-to-let landlord in Oxford is a balancing act many do well. Talking to several Oxford landlords, they are conscious of their tenants’ capacity and ability to pay the rent but feel with their own costs rising, there is now pressure for rents to rise.

Historic evidence suggests that the rents new tenants have to pay typically increase during the summer months. June, July & August is a time when renters like to move, demand surges and the normal supply and demand seesaw mean tenants are normally prepared to pay more to secure the property they want to live in.

Rents in Oxford on average for new tenants moving in have risen 0.9% for the month, taking overall annual Oxford rents 0.9% lower for the year

However, several Oxford landlords have expressed their apprehensions about a slowing of the housing market. I personally feel their negativity may be misplaced.

The other side of the coin for property investing is capital values (which are of interest to all the homeowners in Oxford as well as Oxford buy-to-let landlords).  I believe the Oxford property market has been trying to find some level of equilibrium since the New Year.  According to the Land Registry

Property Values in Oxford are 7.49% higher than they were 12 months ago, despite a drop of 0.07% last month

Yet, I would take those figures with a pinch of salt as they reflect the sales of Oxford properties that took place in early Spring 2017 which are only now exchanging and completing during the summer months.

The reality is the number of properties that are on the market in Oxford today has risen by 41.02% since the New Year at a time when the total number of transactions is down by 17% which will have a dampening effect on property values. As tenants have less choice, buyers now have more choice and that will temper Oxford property prices as we head towards 2018.

Be you a homeowner or landlord, if you are planning to sell your Oxford property in the short term, it is crucial, especially with the rise in the number of properties on the market, that you realistically price your property when you bring it to the market.  With the increase in choice of properties, the balance of power during negotiation generally sways towards the buyer.

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.