The text of a letter one of our readers has sent to his MP following our article yesterday.

Dear Ed

As a conservative voting member of your constituency (I live in Ardington) I wanted to write to you on a subject that very much concerns me.

Together with my wife we are among the millions of private Landlords in the Country who provide accommodation to the private rental market.

We own 5 flats in Oxford which we have invested in over the past several years and rent out, typically to public sector workers in critical roles at the University or the  JR.

I wanted to bring to your attention just how badly the changes introduced by the Chancellor damage the proposition for private Landlords with a small number of properties.

Here is a short illustration of the “before” and “after” situations once the new regulations have been fully phased in by 2020 for 40% tax payers, which is typical for property investors and landlords in Oxfordshire.  I have used 4% mortgage interest rates as an illustration.  Although current rates are lower than that this is a more realistic medium term rate.

As you can see from the illustration above, this pushes the after tax annual income for a landlord down from £1334 for a typical rental property (like the ones we own) to just £134 which is basically unsustainable.

The tax changes mean that as a Landlord running a small business I am being taxed on my “revenue” not my “income”.  This is totally regressive and against the basic principles of fair taxation.

What is the inevitable outcome of this change?

• Rents will increase disproportionately as Landlords seek to offset their costs
• Landlords will skimp on maintenance and other costs and the quality of accommodation provided will go down
• Many private landlords will get out of the sector
• Reasonable quality affordable housing will become more difficult to access as a result
• There will also be fewer property transactions from BTL buyers (resulting in lower SDLT receipts)

I would really encourage you to lobby Philip Hammond to reverse this poor piece of tax legislation which will impact negatively on both Landlords and tenants.

Regards,

________________________________________________________________________________ 

Thank you to Rob for sharing the text.  I recommend that other readers follow Rob's example and lobby their MP as we suggested yesterday.

It's time to get political!

Conservative member of parliament James Gray wants us to use this route to get hold of our MP, over the next day or so - to let them know that you oppose buy to let tax changes.

Gray, MP for North Wiltshire, says:

“ Some of my colleagues and I have energetically taken up the cause with the Treasury but the answer we get is that the changes will, in their view, not actually affect that many landlords.

“Even with the changes, Ministers claim, there is no reason why the impact will lead to landlords having to raise rents or consider dis-investing.

“The only way we as MPs can answer this would be for large numbers of landlords who will be affected by the tax change to come forward and tell us. We will then have the evidence to present to Ministers to prove them wrong.

“Nothing focuses the mind of an MP (or a Minister) more than receiving representations from constituents, especially if many people are saying the same thing.

“Equally, nothing focuses the mind of a Minister more than lots of MPs, particularly from their own Party, telling them the Government has made, as it has here, a big mistake and that changes are needed.

“Landlords themselves therefore have a crucial role to play in seeking the changes to recent tax reforms that the market needs.

“We need you to email or write to your MP or, preferably, go to see him or her at one of their regular surgeries.

“Tell them about the impact of the tax changes on your situation – will you have to increase rents, ? Will you stop investing in further properties? Might you be considering getting rid of some of your holdings? What effect might all of this have on the tenants, especially young people or the disadvantaged in life? Will it wreck the Private Rented Sector just at the moment the Government are saying how much private renting is needed, especially in high house price areas.

“Remember, MPs want to know what impact the property tax hikes will have on their constituents looking for somewhere to live, so present your case in terms of the tax rises making it more difficult or expensive for local people to find housing.

“We need landlords like you, to get their MP to tell Ministers why changes are needed in the Chancellor’s Budget on 8th March.

“Take time out on a Saturday to call into their regular surgeries (details on their websites or via theyworkforyou.com). That counts almost more than anything else.”

OxfordPropertyBlog believes that the changes to mortgage interest rate relief together with the proposed ban on fees charged to tenants will be a Double Whammy - leaving landlords with no choice but to increase rents higher than would otherwise be the case and certainly above inflation.  In Oxford, many tenants already struggle to achieve the required affordability criteria, depending instead on advanced rent payments and/or guarantor security.  Anything that increases rents beyond trend is unwelcome.  Some landlords are already divesting properties to reduce their mortgage debt, reducing supply in a local market that is already under-supplied with rental property.

Now is the time for Oxford's mild-mannered landlords to get political - take the time to email, call or speak with your MP to make your feelings felt.

The housing white paper – some positives, some missed opportunities, and some confusion!

The Government’s much vaunted and long awaited white paper was published this week, and it seems to signal a shift in Government thinking away from the mantra ‘home-ownership = Good; renting = Bad’ to a recognition that both ownership and renting need to be encouraged.  That is something that I have been arguing for several months.  This shift is to be applauded.

We should also applaud the Government’s desire to protect legitimate tenants from rogue landlords.  However, there is still no recognition of the need to protect legitimate landlords from rogue tenants. 

The recognition of the value of build to rent schemes in our cities is certainly a welcome new innovation, and this should help to meet the rising tide of demand for affordable rental properties.  However, the white paper is mute on measures to encourage smaller landlords to continue to invest to expand the supply of available properties in the short to medium term.

Since the white paper was released, many of the headlines have centred on Government’s desire to promote longer-term 3-year tenancy agreements to provide a more stable environment for young families living in rental accommodation.  However, the Housing Minister has subsequently been forced to clarify that those longer-term tenancies will not apply to small buy to let landlords, who are often unable to offer tenancy terms longer than 12 months due to limitations placed on them by mortgage lenders and insurance providers. 

The measures to ease the bureaucracy of decision making and improve transparency of local authority planning policy is also welcome.  New housing is desperately needed across the UK particularly in larger towns and Cities where under-supply is driving prices above wage inflation.

It seems to me that the Government is too focused on popular measures which it believes may result in votes, rather than taking time to think fully about the market, and how best to improve fairness and supply over the short, medium and long-term.  For example, the proposed ban on fees charged to tenants by letting agents, risks landlord costs escalating and rents rising above trend as a result.  Already rents are proving unaffordable, with growing numbers of tenants being unable to pass credit/affordability checks.  Anything that makes that harder has to be unwelcome.  There is certainly a need to bear down on unscrupulous letting agents charging exorbitant fees, but a blanket ban which stops all fees will have unwanted consequences.  The Royal Institute of Chartered Surveyors (RICS) has warned that following last year’s increase in stamp duty for landlord investors, the forthcoming restrictions relating to mortgage interest rate relief will force many smaller landlords to reduce their portfolios and for many discourage further investment.  This at a time when rental supply is so restricted (as recognized by the Government) also seems unwise.

So, a mixed-bag of measures which are directionally correct, but when populism has trumped analysis and clarity of purpose.   Yes there are 4 million voters living in rented accommodation, and protecting them from exploitation is absolutely correct.  But, basing policy on the assumption that all letting agents, all landlords and most developers are exploitative risks undermining stability and supply over the coming decade.

Pick up a new build in Botley, Oxford

Good afternoon all,

I hope you are all well.

I spotted this one on the market with the mighty Martin and Co, Oxford which jumped out at me for all you investors out there. Ok, ok so its my agency. A bit of shameless advertising I know but if it works then it works right?!

Currently on the market for £320,000 this property would fetch around £1195pcm on the rental. Now it has always been my tendency to edge as close to the 5% mark as possible, but if you give consideration to all the elements in the equation it is not the only thing that matters. If you are going into a new investment project with a long term plan then this can absolutely work for you (assuming my projections are correct!)

TURNER DRIVE, OXFORD

The yield based on these figures is 4.4% and as anyone imparting good advice will tell you, in Oxford that is a pretty decent yield Vs prices. It is also sensible to consider that all property owners looking to sell may (I stress may folks!) be willing to accept an offer and if this is the case then your numbers start working even better and your margin for small error gives you extra breathing space.

It is too early to anticipate with the greatest of confidence what the property prices will do here as it is a new development. There are a few sold in this location and even in the early stages because it is new build but you only have to look to new build history to see how things tend to develop.

Nursery Close, Botley was a new development built in 2009 with number 36 Nursery Close selling from new build for £199,950. on the 25th Jan 2016 it sold for £291,000. During this period the rental achievements have gone from £995 to £1250pcm as well.

Put plainly you simply need patience. Not many investors get into the game with a short term plan so for the greater majority of you this really does work.

Obviously there is nothing that needs doing to this proeprty either so additional outlay would not be necessary.

Call me for more on this and others.

Best regards

Richard

Oxford’s landlords' wealth is soaring

According to a comprehensive study of UK housing by Savills, £1.2trn of net housing equity - the portion of a home that is owned rather than mortgaged - is held in privately rented homes.

Private landlords, who account £1.4trn of housing value, have seen the total value of their properties increase by 64% in the past five years, according to the report.


But mortgage-free owner-occupied homes remain by far the largest store of wealth, accounting for almost £4.6trn of housing value, as an older generation of homeowners reaps the benefits of decades of house price increases, while many younger households are unable to access home ownership.

Since the credit crunch of 2008 we've seen the generation gap widen, with younger buyers increasingly struggling to get onto the housing ladder while older home owners live longer and accrue higher levels of equity through house price growth.


In Oxford, high house price to income ratios and new mortgage regulations suggest this pattern will become even more entrenched during the next decade.  The government’s recognition of the role rental properties can make in addressing the housing crisis is to be welcomed, but is at odds with tax legislation that is forcing many private landlords out of the market.

Looking for investment in Headington? Look no further!

Afternoon folks,

You will of course excuse me for interrupting your Saturday afternoon but between a combination of filling my day so the time moves quicker and spotting this cracking investment I simply had to write to you all!

Currently on the market with Chancellors Headington for a guide price (yawn, just ignore the guide price part) of £220,000 you can expect to see this property rent at £1000pcm. I am of course going on the assumption that you will meet competition with other investors and more than likely end paying close to asking price but even still that would see a rental yield of 5.4%. 5.4% in this market! who have thought it, but it is very accurate and the margins for price movement are also there if they were necessary (highly unlikely though based on recent rental evidence)

Internally there is not much wrong with the flat although naturally we would need to get out and see it for a closer look. It is quite compact but I would certainly have some brighter ideas on how best to use the space you have. I might look at neutralising the property a little from its current colour scheme but other than that its good to go.

They appreciate well here in rental. From October 2014 they were typically renting out at £850pcm and now they stretch to £1000 or in some cases slightly more depending on size and condition.

On the 29th October 2010 a one bedroom property sold for £157,500. Just under 6 years later it sold for £205,000.

I look after 4 properties in this development, all one bedroom apartments and not once has there been a void on any of them.

Put simply the numbers really work.

Call me if you would like to know more.

How are Oxford house prices performing?

Over recent weeks I’ve been asked by several people to comment on how Oxford house prices have performed over 2016, and to consider how different parts of Oxford are performing relative to others.  I am here to serve, so here goes…..

Over the last 12 months there were 3,202 property transactions across Oxford which was 12% down on the previous 12-month period.  Despite a fall in volumes, Rightmove advises Oxford prices are 6% up on the previous year.  So reduced volumes have not been mirrored by reduced demand, which remains buoyant.

By property type, apartments have performed the best increasing 14.5% over the last 12 months, followed by detached houses at 7.1%, terraced at 6.4% and semi-detached at just 2.5%.

According to Rightmove, the average value of property sold last year in Oxford is £492,531 6% up on the previous year and 16% up since 2014.  However the spread in performance across Oxford’s main sub-markets is from -9% (Wolvercote) to +14% (Greater Leys).  When view for the period since 2014 the spread is from -6% (Wolvercote) to +30% (Greater Leys).  The top 5 performing areas of Oxford since 2014 are: Greater Leys (+30%); Kennington (+28%); Kidlington (+25%); Cumnor Hill (+23%); and, Boars Hill (+23%).  Over the last 12 months the picture looks quite different, the top 5 being: Greater Leys (+14%); Cumnor Hill (+13%); Kennington (+11%); Cowley (+11%); and, Marston (+8%).

This suggests that after a very strong showing in 2015, Kidlington has paused a little, consolidating the gains rising at a steadier 5% over the last 12 months.  However, it is interesting to note the strength of the market in Greater leys as people search for better affordability and for landlords stronger rental yields.  New developments in Cumnor Hill are lifting prices and transaction volume with prices up 13%, again offering good value and better rental yields for investors.

So how has Oxford performed relative to other UK cities?  Well the average house price in Cambridge is £472,590, and has increased in value by 16% since 2014 – closely matching Oxford which remains a little more expensive.  Bath has an average price of £442,250 but a stronger growth profile since 2014 of 22% which is comparable growth to neighbouring Bristol where an average property is considerably lower at £284,100.  It is also interesting to look at Oxford’s neighbour- Bicester where the average property is worth £312,539 some £180,000 below Oxford, showing comparable 2 year growth of 17%.

There remains an air of uncertainty despite positive economic data, but most commentators agree that Oxford should comfortably match the average UK market forecast of 6% to 6.5% increase in average prices during 2017.  Over the last 5 years Oxford property values have increased by 37%, 2017 looks set to add to that growth positively.