Oxford – England’s number 1 for growth potential

Oxford has come first with Cambridge a close second as the city with the best growth potential in the England, according to a report published this week by Arcadis.  The report highlights Oxford as having substantial potential with only Edinburgh rating higher in the UK.

The report states that Oxford and Cambridge are set to be boosted by the Oxford – Milton Keynes – Cambridge corridor.

Arcadis scored cities in several areas including economic performance, branding, housing, quality of life, quality of place, people, growth and infrastructure. These measures were used to identify the attractiveness for future inward overseas investment for social and economic growth. Oxford achieved a total score of 56.1% with Cambridge on 55.8%, with only Edinburgh topping them within the UK with a score of 65.5%. The report looked at a total of 24 UK cities.

Particularly highlighted were collaboration and JV investments as key to fulfilling the potential, especially in housing and infrastructure – which is a key focus of the Oxford-Cambridge Corridor project. The report states that the corridor will improve investment potential by reducing congestion, making housing more affordable and enhancing connectivity. The corridor is expected to play an important part in enhancing future investment, particularly in the following key areas:

·       Housing – to reduce the ratio of average house prices to average earnings;

·       Road congestion – reducing the hours spent per year in traffic jams;

·       Enhanced airport connectivity – to improve journey times to and from key airports

The first two of these has been given top priority in the work of the Oxfordshire Growth Board (consisting of all six Oxfordshire local authorities). The £215 million Housing and Growth Deal between Oxfordshire and the government is expected to be signed off at the end of this month, and will support the opening up of new housing sites around the county and the development of a Local Industrial Strategy for Oxfordshire.

Oxford house prices matching National average growth rate

Hometrack has release its UK Home Price Index for August 2017, and on first reading it appears to include relatively positive news for Oxford home owners.  Nationally, the average rate of house price inflation is 3.8% which Oxford is matching exactly.  However, closer inspection shows that the National average is being dragged back by London which achieved just 1.9% year of year growth to August 2017.

Whilst Oxford is performing well in comparison to Cambridge (2.8%), Bristol (3.4%) and other major University cities such as Cardiff (3.2%), Sheffield (2.7%) and Liverpool (3.8%), overall Oxford home prices are rising more slowly than 10 other cities in the Hometrack 20 City Index.

Delving further it can be seen that cities like Oxford, that have enjoyed strong growth over recent years, and where average prices have risen strongly, are struggling relative to the best performing cities such as Manchester (7.3%), Birmingham (6.7%) and Edinburgh (6.6%).  Indeed, the 3 most expensive cities in the index London (£489,100), Cambridge (£434,500) and Oxford (£425,800) are each in the lower half of the table, with oxford out-performing both Cambridge and London.

So, is this good news or bad news for Oxford’s home owners?  Well it really depends on circumstance. 

With new build homes struggling to exceed 1% of the total transactions completed over the last 12 months, for first-time buyers, Hometrack’s statistics offer bad news.  Despite the total number of house purchase transactions being down over 20% compared to the previous 12-month period, there remains inflationary pressures, which is widening the affordability gap for first-time buyers.

For Oxford home-owners, the news is more positive.  Despite transaction volumes falling substantially, their homes continue to rise in value ahead of the general rate of inflation.  However, with the market as a whole being generally slower, those planning their next move may need to be patient to find a buyer and to find their ideal next property.

Careful research into Land Registry data for Oxford also shows that the price increments between Flats, terraced, semi-detached and detached homes are high.  Over the last 12 months’ flats have averaged £280,276, terraced houses are on average 36.7% higher (£383,104); semi-detached are just 7% higher than terraced (£410,615) but detached houses are a staggering 46.4% higher than semi-detached (£600,934).  This means that for many who own an Oxford property, it is difficult to ‘trade-up’ to larger properties.  And, the lack of new build means that for many they must either rent to live in Oxford, or live in more affordable places like Bicester, Didcot and Abingdon and commute into Oxford for work.

Oxford house prices remain subdued

House price growth in key British cities has fallen from 7.4% in July 2016 to 5.3% but some locations continue to see above average prices rises, the latest index shows.

Oxford prices achieved year on year (YOY) growth of just 1.2% in July, and are marginally down overall over the last quarter (-0.1%).

The biggest annual growth was in Birmingham with a rise of 8%, followed by Manchester up 7.1%, Nottingham up 6.0% and Southampton up 6.5%, according to the data from Hometrack.

In Aberdeen, the market has not recovered from a downturn due to falling oil prices and the city has seen negative growth for two years. Prices are 16% lower than they were in 2014 while year on year they are down 3% and month on month down 0.3%.

In London house price deflation has bottomed out with an increase in the annual rate of growth to 2.8% and month on month growth of 0.9%.  With Oxford increasingly mirroring the capital, albeit with a delay of 6 to 9 months, the slight recovery in London prices is to be welcomed, and may point to Oxford avoiding falling into negative territory YoY.

The index confirms that pressure on prices is greatest in the most expensive parts of London where demand has been weaker since the end of 2014. These inner London markets are registering small year on year price falls of up to 2%. The downward pricing pressure is less evident in the lowest value markets of London which have registered above average growth and price inflation of over 3%.

Looking ahead, the report says that there remains a clear divide between the prospects for house price growth in regional cities, where affordability levels are attractive, and the prospects for house price growth in London and other high value cities in southern England such as Oxford.

‘We expect house price growth in regional cities to be sustained at current levels for the rest of 2017. London is set for a sustained period of low nominal house price growth and lower sales volumes,’ it adds.

Oxford house prices over the last 12 months show postcode variation

Over the last month I have been asked by regular readers to help them understand what is going on with Oxford property prices, with several asking specifically ‘should I invest in Oxford right now?’.

You can be forgiven for being confused, the property news headlines can be contradictory on the same day!  Recently 3 different national newspapers use the same report to variously claim prices were recovering and recording growth, house prices were falling for the 4^th month in a row, and house price growth was sustained but weak!

The only way to get to the truth is to look at specific data for specific postcodes.  Using Rightmove data, I have looked some key Oxford postcodes to establish what is the true picture.

Overall property prices for properties sold on Rightmove over the last 12 months are 6% higher than for the prior 12-month period and 20% up since 2014.  That means anyone who has invested in Oxford property since 2014 has achieved a steady capital growth return.  So that’s great!

But, the true picture is more ‘granular’ than that.  By looking at comparable data for just 4 postcode segments (Headington; Cowley; Summertown; and, Jericho) it can be seen that the value of Oxford properties varies widely by location, as does the performance in terms of capital return.

Cowley has offered the best overall return, reflecting the performance of the City as a whole closely – prices are up 5% o the prior 12-month period and 20% up since 2014.  Cowley also continues to offer the best value for money overall.  At the other end of the spectrum is Jericho, where prices over the last 12-months are down 10% on th prior 12-month period and just 6% up on 2014.

The analysis points to markedly lower growth in property values in the expensive parts of Oxford, and relatively strong performance in those areas that offer relatively strong value for money.

For my article next week, I will expand this analysis to other postcode segments in and around Oxford, in the hope that it will further enlighten us all on where in Oxford the best returns in terms of capital value might be found.

To date, only the most expensive parts of Oxford are suffering real decreases in achieved prices, with Jericho and Summertown appearing ‘soft’ by comparison.  However, for landlords capital appreciation is just part of the story – rental yield also needs to be factored-in to calculate true return on investment.  Again, I will look to unpick this too over the coming weeks to give owner-occupiers and buy to let landlords understand the Oxford market a little better