‘Flipping’ Heck - Oxford Property Values Rise by £68.19 a day

Investing in Oxford buy to let property is different from investing in the stock market or depositing your hard-earned cash in the Building Society. When you invest your money in the Building Society, it is considered by many as the safe option. But, the returns you can achieve are awfully low (the best 2-year bond rate from Nationwide is a whopping 0.75% a year!).  An alternative investment is the Stock Market, which can give great returns, but unless you are able or willing to be on the phone every day to your Stockbroker, you will most likely invest in stock market funds - making the investment quite hands off meaning one always has the feeling of not being in control. 

However, with buy to let, things can be more hands on. One of the things many landlords like is the physical nature of property - the fact that you can touch the bricks and mortar. It is this factor that attracts many of Oxford’s landlords – they are making their own decisions, rather than entrusting them to city whizz kids in Canary Wharf playing roulette with their savings.

I always say investing in property is a long-term game. When you invest in the property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as 'capital growth'. Capital growth, also known as capital appreciation, has been strong in recent times in Oxford.  Whilst the value of property does go up as well as down (just like shares do) Oxford has enjoyed consistent year on year increases since 2006.  Rental income is what the tenant pays you - hopefully this will also grow over time. If you divide the annual rent into the value (or purchase price) of the property, this is your gross yield, or gross annual return. Deducting any mortgage and other costs such as maintenance and/or letting agent fees gives you the net yield.  

Over the last 5 years, an average Oxford property has risen by £124,450 (equivalent to £68.19 a day), taking it to a current average value of £490,800 (based on all properties sold registered in the Land Registry). Gross yields start at around 4% a year, but can reach double digits’ percentages for larger properties that have a licence to be a house of multiple occupation (HMO).

However, something I haven’t spoken of before is the more specialist area of flipping property to make money. (flipping - buying a property, carrying out some minor cosmetics and re selling it quickly).  I have seen several investors recently who have made decent returns from this strategy. For example:

• One Oxford Investor paid £290,000 for a 2 bed apartment on Cheney Lane in January 2015. It appears some cosmetic work was done to the property and it was resold a few months ago (November 2016) for £360,000 a 24.14% return before costs (or compound annual return equivalent of 12.29% AER) http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=42804441&sale=89070732&country=england
• Another Oxford Investor flipped a lovely 3 bed semi on Croft Avenue, Kidlington, paying £330,000 in May 2015 and selling it again after some doing some cosmetic works for £422,500 a few months ago (December 2016) … 28.03% return before costs (or equivalent 16.52% AER) http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=45863565&sale=89071191&country=england

This demonstrates how the Oxford property market has not only provided very strong returns for the average investor over the last five years but how it has permitted a group of motivated and active landlords to become particularly wealthy. 

In my article next week I will introduce the proprietary model I have developed to help landlords and property investors to plan their returns – understanding how to optimise a portfolio for both capital growth and rental yields.

Landlords - Use letting agents, don't rely on listings websites

The following article was published by Letting Agent Today.  It is unusual for us to re-publish an article in this way, but this is an important topic given the cost pressures many landlords are feeling.  It will be tempting to look for ways to reduce operating costs and in so doing open themselves up to unforeseen risks.

With the forthcoming ban of letting agent fees to tenants, there will be further temptation to skip credit and employment reference checks on tenants, exposing landlords to unscrupulous tenants.

As reader know, as well as being author of this Blog, I am the owner of Martin & Co, Oxford, which is a letting agency.  So, of course I do have a vested interest in Oxford landlords continuing to use a letting agent (particularly my own!).  However, with so much government scrutiny on protecting tenants from unscrupulous landlords, it is important that landlords recognise the risks presented to them from unscrupulous tenants.

In recognition of the risk to landlords of letting their property to rogue tenants we offer our clients access to a comprehensive protection policy that provides financial protection in the event that a tenant risk like this materialises, despite the credit and employment reference checks conducted by us having been passed prior to the tenancy commencing.

The article read as follows:

The founder of eviction specialist Landlord Action is advising landlords to use accredited letting agents and not try to take the cheap option of advertising for tenants on websites. 

Shamplina is a host of Channel 5’s TV show Nightmare Tenants, Slum Landlords, and on last evening’s episode he discovered what happened when one landlord decided to let her property through a listings website. 

Initially she was delighted when a young professional moved into her flat promising to look after the place. He boasted of a private education and his references showed a successful career in the City - but it didn’t take long before he stopped paying the rent. 

"We've learnt that bad tenants are more likely to target [websites] because they hope they will be subjected to fewer checks. In the future, we'd always go through an agent - although even this has no guarantee. It's the law that needs to change to make landlords less vulnerable to unscrupulous tenants” McNaught told the programme.

Shamplina says this situation is not uncommon. 

“This guy is a serial bad tenant. He has been evicted previously after running up costs of £30,000 in unpaid rent and stolen furniture from an overseas landlord. In Vicky’s case, he used false references to secure the property.” 

Shamplina says this should serve as a serious warning to landlords about using free classified websites to advertise their property to rent. 

“We’ve come across many similar cases in the past where we see serial bad tenants prey on less experienced landlords who let their properties on consumer websites. Unfortunately, the majority of these landlords are deceived by well educated con artists. With absolutely nothing in place to safeguard landlords, they find themselves in all sorts of trouble” he says. 

Back on the investment trail in Yarnton, Oxford

Hello folks,

For those of you looking into your next project then please look no further!

I pride myself in spotting a good' un when I see it and this certainly is (correct price permitting of course!)

On the market with Alistair Redhouse for £299,950 this will fetch £1195pcm for rent. In some cases these properties scale £1250 but this second bedroom is slightly on the smaller side so I decided to be a little conservative.

£299,950??? On 28th October 2016 number 68 sold for £282,000 and it is bigger, so I am not sure I agree with this valuation especially when I consider that an electric shower would need installing in the bathroom. Having said that this is small detail and at the right price (close to this one I would say) you achieve your 5% yield figure which is a real plus.

Yarnton itself is massively popular. There is alot to be said about 'city centre' locations but equally as much about the 'quiet life' and Yarnton holds massive appeal. It is easily accesible for Kidlington and Oxford centre and is perfect for travel on to all major routes.

For more on this and others please call me.

Best

Richard

Oxford landlords – don’t scrimp on an Inventory!

In a recent Bristol court case where a group of six student tenants claimed back in excess of £750 of deductions made by their letting agent.

The six took letting agency Digs to court after the firm - acting on behalf of a landlord client - informed the tenants that £756 would be deducted from their deposit to cover cleaning and reprinting. 

One of the tenants - Ed Straw - disputed the deductions and took Digs to court, using photographic evidence to support his case. Digs was subsequently ordered to repay the deductions in full, plus interest and court costs.  

In times when landlord costs are rising, it is tempting to look for places to save money, but comprehensive inventories protect both landlords and their tenants, ensuring that there is a detailed record of condition prior to a tenancy and following the end of a tenancy.  Tenants should be given the opportunity to review and make comment/amendments to the inventory on taking-up residency, and be given every opportunity to rectify any damage or cleanliness issues on departure.  Letting agents have a critical role to play, to ensure amendments are reviewed and agreed based on physical inspection, and to communicate any developing issues through the term of a tenancy – a ‘no surprises’ approach is critical as is a good working knowledge of how deposit protection agencies will adjudicate to ensure retentions are most likely to be seen as reasonable.

So what does Brexit mean for the Oxford rental market??

Good morning all,

So months on from the UK's decision to leave the EU I have been considering what it might mean for the PRS (Private Rented Sector) Will rents rise, fall or stay broadly the same?




There has been so much post-Brexit analysis on property prices and homeowners that its impact on another key component of the market – the rental sector – has slipped under the radar somewhat.
A growing ‘Generation Rent’ has been a result of a sharp rise in house prices but if there are going to be, as Michael Gove put it, “bumps in the road” before the contours of Brexit Britain becomes a bit clearer, tenants may have to brace themselves for a bumpy ride (at least in the short term).

The key question, inevitably, is what will happen to rents? And will they change in the short or long term? Some experts are predicting they will rise, others that they will fall, and the truth probably lies somewhere in the middle. The popular advice upon the news being broken was to take a 'long, deep and calm breath' to consider what will happen next.

If the broader property market stalls in the next six months, as some experts are predicting, tenants would ordinarily expect to reap the benefit in the form of lower rents. But some landlords may try to put up rents as their buy-to-let costs increased following recent reductions in mortgage tax relief. This is in addition to considerations being carefully given to the impending tenant fee ban (whenever it comes in)

In addition the pressure on the government to curd migration has always been well documented and it could be further highlighted by our decision to leave the EU which could reduce demand in the private rental sector. But much is going to depend on how many properties are available for rent and as we all know, particularly in Oxford demand far outstrips supply.

Given the current circumstances, anyone currently renting or looking for a property to rent would be well advised to bear in mind the following points:

1. Make sure you keep yourself informed about what is happening in the UK property market generally. If there are likely to be rent rises in the pipeline, for whatever reason, it is best to be forewarned. Don’t bury your head in the sand. Stay tuned.
2. Some landlords may take the view that now is not the best time to sell their properties as house prices may be subdued over the coming months. Similarly, those who were thinking of selling may let their properties instead. This would lead to a greater number of properties available across the rental sector. Good news for tenants.
3. On a precautionary basis, budget for your rental costs to rise slightly over the next two or three years. If they do rise, you will be prepared. If they stay the same, you will have money in the bank.

With all the prevailing political uncertainty, tenants are likely to feel many of the same concerns as homeowners in the months ahead. But they need not be unduly despondent. After all, renting property often allows more flexibility than owning property and, in a fast-changing world, flexibility could be your trump card. (for more on this please see my 'Rent Vs Buy' blog)

Oxford property market health check

Over the last 12 months the total value of Oxford property sold was £1.4bn.  There were 3,216 completed transactions which was 11% down on the prior 12-month period. 

20% of the properties sold were flats with an average sale price of £274,863; the remainder were houses with an average sale price of £443,755.  Overall, the average achieved sales price was £403,165 which was 11% up on the prior 12-month period.  The highest valued flat sold for £1.65m and, the highest value house sold for £9.75m.

Over the last 3 months all highest value transactions have been in OX2 with the top three being on Pullens Lane - £4.75m, Crick Road £3.55m and, Hids Copse Road - £2.9m.  The total value of transactions during this period was £337m of which 16% were flats and just 2% were new build.

Historically, when transaction volumes fall, so too do achieved prices.  In Oxford average achieved prices have not yet reduced despite a significant 11.1% fall in transaction volumes.  Over the same period transaction volumes across SE England have fallen by 9.4% and across England & Wales by just 1.5%. 

By property type prices are up across Oxford, flats have risen by 14% to an average of £274,863 which is well above the £190,103 average for the South-East of England.  Terraced houses (up 7% to £380,743 vs. £263,129 across the SE) and semi-detached houses (up 2% to £401,430 vs. £321,256 across the SE) have risen at a lower rate than the SE average, whilst detached homes have matched the rise across the SE (up 8% to £614,527 vs. £496,528 across the SE).

Overall Oxford property has continued to offer current owners strong return on investment, whilst presenting buyers with a higher cost of entry.  To date, the market has shown resilience in the face of lower transaction volumes, suggesting demand still out-strips supply. 

Let's stay in Cowley shall we?!

RELIANCE WAY, COWLEY

We have a proud history of letting property in this development. Recently a client of mine sold his on and its always a shame to lose them because they are such good investments in a great location (an investor bought the one we sold so I got it back anyway!!)

On the market with Chamberlain Evans for £325,000 these are now fetching £1395pcm which at asking price brings you bang on the money at 5.1% yield.

Internally it looks sound. Items I note from a lance are:

Fixed electric shower to main bathroom
Possible repaint
Re-carpeting possible

Small costs against the long term appreciation.

In 2010 they were letting for £1095pcm. Go back as far as 2006 and they shifting for £995. Just over 10 years on this development has achieved a 29% increase in rental return and 10 years ago in August 2006 a 2 bedroom apartment sold for £250,000. On the 26th April 2016 it sold for £325,500. A 24% increase in capital appreciation.

They don't tend to hang round long either. Oxford investors who know their market know a sound investment when they see one. Get in quick!

Its a winner in OX4!!

Afternoon all,

LIZMANS COURT, COWLEY

They just keep on coming!

I have blogged about this development on a few occasions and one investor took me up on this mid 2016. They purchased it and have lived happily ever after since (or so goes the theory)

The returns are just sooooooooo good here folks. I present you my next find:

On the market with Chamberlain Evans for £230,000 you will see a rental return of £1050 per calendar month which will give you a whopping 5.4% yield!

BUT! but, but, but. Work is needed as you can see.


Bathroom is not included in these pictures but let's assume that you are getting a new one. You need a repaint throughout and brand new carpets to bedroom. I would go with high quality laminate (ask me for more on what 'high quality laminate is!) which will reduce the maintenance ongoing, considerably.
 
It will also need furnishing with some decent furniture as well as curtain tracks and lampshades with new curtains and blinds to bathroom.

I stress the approximation of my estimated costs but I have overseen a few refurbishments!

Total cost - £5000

 If you paid asking price and added this cost on top you still walk away with a rental yield (gross) of 5.3%.

Their rental history is solid dating back to 2005. You rarely see any voids in these apartments if ever. And do they appreciate? You bet!

On the 4th July 2012 number 21 Lizman Court was purchased for £155,000. On 10th May 2016 it sold for £220,000. Need more proof? In December 2014 number 9 Lizman Court was purchased for £168,000 and on 28th August 2016 it sold for £204,000.

Different shapes and sizes apart, they appreciate nicely.

The budget

Yesterday's budget held no good news for Oxford's landlords making no mention of interest-rate relief nor the ban on letting agent fees to tenants.  As a result we have to assume that both measures are baked-in to Treasury forecasts.

Despite widespread and growing condemnation of the Government's attack on landlords, there is no sign of policy change in relation to stamp duty nor on mortgage interest rate relief.  Use the link below to join forces with others including ARLA and NALS to oppose these policies and to stay abreast of developments:  https://www.tenanttax.co.uk/

Whilst there were no new announcements about the Government seeking ways to target landlords incorporating companies to enable them to continue to off-set mortgage interest rate relief, there is widespread commentary that this will form part of future budgets.  The increase in NI contributions for the self-employed confirm policy direction that is seeking to harmonise employee and self-employed tax rates.  This move appears to over-look the fact that self-employed people can not access the range of wider benefits typically available to employees, meaning the self-employed will be increasingly disadvantaged in comparison with company employees.

Is this the best time-ever to be a tenant?

The government’s English Housing Survey shows that the reality of the private rental sector is far from the one that some (including many in parliament) portray i.e. one of disgruntled tenants in conflict with greedy uncaring letting agents and landlords.

The National Landlords Association, analysed the EHS’s latest findings, showing that in 2015-16 in England the private rented sector accounted for 4.5m or 20 per cent of households; predominantly occupied by people aged between 25 and 34. 

Comparison to 10 years ago is informative. In 2005-06, 24 per cent of those aged 25 to 34 were private tenants, whereas by 2015-16 this had increased to 46 per cent, confirming the importance of the private rented sector as part of an integrated housing strategy. The NLA says that over the same period, the proportion of 25 to 34 year olds buying with a mortgage decreased from 53 per cent to 35 per cent.  It is believed that this is a combination of tougher requirements for deposits and affordability criteria implemented by lenders and, a shift in consumer preference towards the flexibility of renting.

Tenancies are also longer than many believe, according to the EHS data. The survey finds the current average time a tenant lives in their home to be over four years.   

Perhaps most surprising of all is that as a proportion of household income rent has fallen in the past 12 months; on average households spent 35 per cent of their total income on rent.  

Energy efficiency is also continuing to improve.  The share of rental properties in the F and G efficiency bands are down from 10.6 per cent in 2013-14, to just 6.3 per cent in 2015-16. 

Within the context of these figures, the best way to speed up improvements in the private rental sector will not be through more legislation and demonising landlords, but through funding the enforcement of existing laws and recognition in the tax system of the vital role landlords play.

Based on this evidence, government policy to hit landlords financially is misguided and unnecessary.  The move to ban fees paid by tenants to letting agents is not designed to reduce tenant expenditure (as that is already reducing as a proportion of income), but instead is purely a populist policy to gain votes.

The Chancellor must change stamp duty policy for the good of Oxford’s property market

As regular readers will know, I have previously identified that Oxford needs close to 7,000 new private rental properties over the coming 3 to 5 years to meet forecast demand for quality private rented properties.  Readers will also know, that the nature of demand is changing in Oxford.  For example, as property prices continue to rise, there is an increasing demand from young professionals for good quality rooms in houses of multiple occupation (HMO’s).  These tenants require en-suite facilities, large bedrooms with double or king-size beds, and good quality kitchen and living accommodation.  In other words, large properties that have been professionally converted for young professional singles and couples to live privately and comfortably.

Current Government policy in relation to Stamp Duty Land Tax (SDLT) is distorting the market, and threatening to exacerbate the imbalance of excess demand vs. insufficient supply.  The Chancellor should grasp this nettle before it’s too late.

Over recent years the volume of transactions for higher-value homes (over £2m value) has fallen by 70%.  Where a home valued at over £2m is bought as a second property, the SDLT due is £213,750…Ouch.  Should the same investor instead choose to buy two second properties each worth £1m, the SDLT falls to £147,500.  Still a lot of money, but a saving of £66,250.

Why does this matter in Oxford?  Put simply, it is distorting the local property market.  Over the last 12 months transaction volumes are down 11%.  This largely reflects lower levels of investment by buy to let landlords since the 3% SDLT surcharge was introduced for second properties.  However, so far prices are holding firm, with transactions over the last 12 months having an average value 11% up on the previous 12 month period.  This means the market has less choice (fewer properties being sold) and is no more affordable for private owner occupiers. 

Whilst landlord investment is down in terms of volume, that which has been sustained is concentrated in the sub £1m property band as landlords try to limit their exposure to SDLT.  This concentration means average property values continue to rise in this critical property band, driving more private buyers out of the City because they can’t pull-together the size of deposit demanded by their lender.

Worse-still, because landlords have a taxation disincentive to invest in larger more expensive properties, the Oxford market is failing to respond to changing demand, meaning the high-value young professionals who are attracted to Oxford for its knowledge-rich economy, can’t find the high quality HMO options they require to make Oxford an attractive and affordable place to live.

Until Oxford increases new house building by a factor of 10, the local economy will depend on a strong, diverse and high quality private rental market.  Current stamp duty policy places that at risk, distorting property values by artificially increasing competition for property in the £400,000 to £1m price bracket.

Investment opportunity of the week!

BENNETT CRESCENT, TEMPLE COWLEY

Morning folks,

I hope you are well.

I am always hunting down something as close to 'the mark' as possible and this one stacks up.

On the market with Chancellors Cowley for £325,000 you can expect to rent this for £1300 to £1325 per calendar month. That will see a return of 4.8% based on a split at achieving £1325pcm.

It is 715sq ft with 2 double rooms which ensures the demand will remain constant as it appeals to 2 working professionals, couples or a single professional. A very large proportion of the Oxford property market right there!

Internally it is very nice (or at least from the pictures anyway) so this cuts out work. It is low maintenance as well so you'd hope there is little scope for ongoing tenant phone calls in the middle of the night I would think!

On the 2nd July 2014 number 48 Bennett Crescent was purchased for £244,000. On the 21st June 2016 it sold for £310,000. That is a whopping turn around in 2 years.

Further evidence of this price movement comes from another 2 bed (number 66) picked up for £192,500 on 21st March 2006. It recently sold for £310,000 on 15th August 2016.

And now they are pushing out at £325 - £350k. This block certainly shows no sign of slowing down and has a very solid rental history. I look after 4 in this location and they are always guaranteed to rent. This particular one would be a very appealing addition to anyone's porfolio.

Call me for more.

Best regards

Richard

Mortgage interest rate relief - Slides from our seminar yesterday

The first of our series of landlord seminars yesterday included speakers from Critchleys, Hedges Law and London & Country Mortgages.  During the event we discussed how the forthcoming changes to Mortgage interest rate relief will affect landlords depending on their personal circumstances and we considered ways that may help some to off-set the impact through the use of company structures and through re-mortgaging.

The session involved lots of interaction between speakers and the audience, and we have already received great feedback for example:

"Thank you for an extremely interesting meeting yesterday.  Although I knew about the tax changes what was really good was to have the accountant, solicitor and finance person all in the same room to answer the various queries relevant to their specialism"

"It was good to meet you last night, I thought the seminar was very informative and appreciate the time you all gave up.  Can you please add me to your mailing list so that I don't miss the next one." 

If you were unable to come along, but would like to receive the slides, please email me at:

info@oxfordpropertyblog.co.uk

Landlord Seminar - Facebook live stream

As you know tonight we are hosting a Landlord Seminar at The Oxford Spires Hotel from 6pm to 7.30pm.  During the session we will discuss the impact of the forthcoming changes limiting the extent to which landlords can off-set their mortgage interest relief vs tax.

For those unable to join us we are attempting a first....to live stream the event via our Facebook page.  To view the event you will need to click the following link: 

https://www.facebook.com/martincoox/?ref=aymt_homepage_panel

And 'like' our page.  Thereafter, if we work the technology correctly....you should be able to watch on your mobile, laptop or tablet PC.