Investment opportunity for a 2 bed in central Cowley!

Good afternoon all,

For those of you still in the hunt of building your empire please have a look at this one which I happened across during my investment search.

Currently on the market with Chancellors Estate Agents for £350,000 you can expect to see  this let for £1300pcm which returns 4.4% which is a very healthy yield for such a good location and for a very nice apartment.

To be honest there is very little that would need to be done with this. It may need a paint in places and any carpets may need inspection when the property is vacant. A viewing would definitely be in order for a closer look but its turnaround to make it available to new tenants from purchase is minimal.

They are popular for both renting and purchasing. There is a rich history for both. Only last week I had one available for rent and it went 4 days into the marketing. The sales activity paints an equally positive picture which bodes well for any future capital gain.

From the 30th March 2007 to present day number 116 Reliance Way was purchased at £250,000 and sold on the 27th March 2015 at £321,000. At today's suggested sales price it has appreciated by over £100,000 in the last 10 years.

Call me if you would like more information on this and others.

Best regards

Richard

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.

The Waitrose effect

A recent study commissioned by Lloyds Bank shows that houses in close proximity to a Waitrose, Marks and Spencer, Sainsbury’s or Iceland are most likely to gain a higher house price premium than the town average in which they are located.

Properties close to an M&S have the second highest premium at £29,992 than hoes further away.  Proximity to a Sainsbury’s add £26,767 and Iceland £22,767.  Waitrose reigns supreme, however, with a typical £36,480 uplift.

On average walking proximity to a supermarket adds an average 9% according to the study, with Aldi, Lidl, Morrison’s or Asda adding on average £21,400.

Regular readers will recall that in a recent article I outlined changes that I expect to see in Oxford’s private rented sector, with tenants renting for longer periods of their life and increasing demand for homes that allow their young families to grow with 3 beds, and proximity to schools and supermarkets.

The Lloyds report is a two-edged sword for Oxford’s landlords, as it suggests there will be a cost premium to buy properties that will be demanded by this group of tenants, but equally landlord’s should have confidence that that premium will be maintained over the medium to long-term, most likely increasing demand from tenants and allowing a premium rent to secured.

Owners of central Oxford properties should hope that a similar ‘John Lewis’ effect will be felt once the Westgate development completes.  Experience from Cardiff where a comparable John Lewis-led development occurred, suggests that the John Lewis effect could be even more significant than the Waitrose effect.  Owners of properties in Oxford Castle, Tennyson Lodge, Empress Court, The Lion Brewery and Castle Mews should see an uplift in capital values once the new apartments in Mill Stream Edge are sold-out.

Commisery vs. Home sale regret – which estate agency model is best? PART TWO

This article follows last weeks, and is the second of two articles that considers the pros and cons of online and traditional estate agency business models.  This week, I will consider the true cost of each model, the relative importance of maximising the price achieved vs. reducing the costs involved; and, how agents secure a price premium.

Is the online offer as cost competitive as it appears?

On first look, the online offer looks unbelievably cheap, and hence the Purplebrick’s marketing focus on ‘comisery’.  But, is it really that much more efficient?

A good-performing traditional estate agent expects to sell around 65% of the properties it lists, and clients only pay a fee if they sell. According to a recent survey, online agents average up to 50%.  That means that half of online agent clients will pay a fee but will not achieve a sale.  Of those that don’t sell, 17% go on to appoint a traditional agent to sell their property.

Per 100 properties listed, an online agent in Oxford will receive fees on every property.  At the current average of £995 that’s £99,500 in fees.  If only 50 of the properties sell, that’s £2,000 per property sold.  For the traditional Oxford agent mentioned above with average fees of 1% of sale price, 65 properties will sell at an average fee of £4,085 per property sold. 

Based on this, the online model under-cuts the traditional model by 50% per property sold in the current market.  But that is achievable only because clients whose houses fail to sell, effectively subsidise those whose houses sell.  Great news for sellers who sell, but very bad news for those who don’t, many of whom then appoint a traditional agent anyway.

What’s more important sale price or agent fee?

Because an average Oxford property costs £408,500, each 1% extra achieved on a home’s sale price delivers around £4,000 of additional return for the seller.  That means an accepted offer at 95% of the asking price for an average Oxford property is £388,000 or £20,400 below asking price.  It seems to me entirely fair to assume that an agent whose fee is proportional to the price achieved will have more incentive to try to maximise the sale price, rather than encouraging their client to settle for a ‘good’ offer because their fee has already been paid.

An agent that negotiates hard on behalf of their client, achieving offers from multiple parties will achieve a 2 to 4% premium.  Let’s assume a 3% premium is secured on the above property resulting in a sale price of £400,000, that’s a price premium of £12,000.  Where the traditional agent fee is 1% (a typical level for Oxford) their fee will be £4,000, resulting in a net gain for the client of over £7,000 (having allowed for the online agent fee of £995).  So, despite paying a fee four times the value of the online agents, the client is over £7,000 in profit.

It is this fact which is causing questions to be asked about the online agency model.  Can a model where the fee is paid up-front, really encourage that agent to strive to achieve the 3% premium described above.

Selling an Oxford home is all about maximising the price you achieve

Homes in Oxford are expensive, securing the best possible price is THE most important factor.  When 1% of an average home equates to over £4,000, working with an agent you trust, and who will work with you in the way you want is the most important factor. 

The true premium paid for traditional estate agency is almost impossible to determine with the data that is currently available.  Increasingly we will see hybrid agency models emerging where seller will be able to personalise the approach their agent takes to reflect their own requirements.  It seems to me that every seller should focus on maximising the sale price they achieve and ensuring that a buying chain is nurtured across the line so sales complete.  That can only be done through dedicated attention to detail, by experienced agents.

Commisery vs. Home sale regret – which estate agency model is best?

Which model of estate agency is best – online or traditional, and how do they differ?  Which model serves its clients best? Does an estate agent have a fiduciary duty? (a ‘fiduciary’ being a person who holds a legal or ethical relationship of trust with one or more other parties) and, does either model undermine that duty?  Finally, which offers the best value?

I will consider these and other questions from the perspective of a property owner over the next couple of weeks.

How do the models differ?

Traditional estate agency is based on no-sale, no-fee.  If the agent fails to sell the property their client pays nothing.  If they secure an offer that proceeds to an exchange of contracts, they claim their pre-agreed fee.  Typically, that fee is quoted as a percentage of the achieved sale price. For an average Oxford home that sells for £408,500, the current average commission paid is 1% or £4,080. 

With online agents, the client pays an up-front fee which covers in advance the cost of marketing, and pays the agent its profit margin.  If the property sells both parties benefit, but if the house does not sell the client has still paid the agent’s fee.  In Oxford currently, the average paid for an online agent is c£995.

Both approaches typically advertise a property via the same online portals, but typically the online model is less comprehensive in terms of the support provided for example some online agents expect clients to conduct their own viewings, and provide only rudimentary sales progression, others offer a menu whereby the client can pay a larger fee for a fuller service.  The traditional agency model is more uniform and includes all aspects of marketing, viewing management, negotiation of offers, sale and chain progression.

Some sellers prefer to work with multiple agents, believing that competition between agents ensures that they work harder to ensure that they (as opposed to their competitor) achieve the sale.  Others prefer to select just one agent who they trust to provide them an effective service. 

Where two traditional agents work in competition only one fee will be payable by the client to whichever agent secures the sale.  Typically, the fee paid using multiple agents is higher than the fee paid to a sole agent.  Where an online agent and a traditional agent work alongside each other, two fees may be paid i.e. the online agent charges their standard up-front fee, but the 2^nd agent secures the sale, making their fee additionally apply.  It could therefore be argued that the up-front nature of online agent fees discourages the appointment of multiple agents.

Currently online agents have around a 4% market share which is growing steadily, traditional agents have a 96% market share.

What is the agent’s responsibility?

A recent Opinion, prepared for the UK PropTech Association (UKPA) by Ian Rees Phillips of 6 Pump Court, explores how the nature of up-front payment for estate agency services may create a conflict of interest between the online estate agent and property vendors.

The opinion concludes that the online agents and traditional agents owe a fiduciary duty to their home seller clients, and that there is a “significant danger that breach of fiduciary duty is baked into the online estate agent model.” 

What causes this potential conflict of interest? The fact that the fee is paid up-front, and is paid irrespective of whether the home is sold or not is the central concern.  But, there is a further concern, that once paid, the agent no longer has an incentive to put every effort into securing the best sale price for their client.

Whilst the traditional agent is typically more expensive, because it is a proportion of the sale price achieved, the agent’s financial interest is aligned its client’ interests.  Because it is only payable for success, it requires the agent to accept and manage a greater level of risk, encouraging a more realistic initial valuation or else risking incurring cost without succeeding in achieving a sale.

How is Oxford’s rental market changing?

In Oxford, like the rest of England, around 20% of all homes are now rented.  A recent survey of people showed a decrease in the proportion of young people (under the age of 35) who own their own home, and separately another study showed an increase in the number of people who don’t ever expect to own a home.  Of greatest concern to first time buyers is their ability to save for the deposit required under the new mortgage lending rules.

So, what does this mean for Oxford’s private rented sector?  Firstly, growth in demand in the City seems likely to be sustained over coming years.  Whilst UK government policy is making life financially harder for landlords, it reflects a recognition that the private rented sector has become an important and permanent part of the urban housing landscape.  As more and more people depend on private rented homes for longer periods of their life, it has become important for government to appeal to this group of voters by being seen to help them (e.g. via a future ban on fees charged to tenants).  It has also become much more important that the private rented sector can withstand a financial shock.  Bearing down on landlords with high levels of debt by increasing the cost of entry for new investment (via the stamp duty surcharge), and increasing the cost of debt (via the reduction of mortgage interest rate relief; and the introduction of tougher loan to value ratios), should reduce the long-term volatility in the sector.  How? Well, in the short-term as highly geared landlords choose to sell some or all of their portfolios volatility looks set to increase.  This may bear down on property prices for a period, but as far as government is concerned that’s OK – they welcome anything that reduces the cost of housing for owner occupiers.  Their calculation is that over the longer term, professional landlord’s – private and corporate, will fill the void, create a more robust private rented sector with long-term investment strategies and with sustainable levels of debt.

In Oxford, it seems likely that the impact of government policy will be felt more acutely because the entry cost of property is relatively high, the average rental yield is relatively low and landlord returns have been dependent on the capital appreciation of property year on year.  Because of that, rents in Oxford have risen more slowly, as landlords recognized the need to ease the rental cost for tenants during some tough years between 2008 and 2015, relying instead on predictable capital growth.

Looking forward, I believe that a significant trend in Oxford will be an increase in demand for rented family homes.  As tenants either choose not to buy their own property, or feel unable to save for a deposit, they will spend longer in the properties they occupy.  As their families grow they will look for different accommodation that better suits their needs, and location will be determined by different factors such as proximity to schools, access to commuter routes and child friendly open spaces.  Oxford caters well for this maturing and shifting demand.  Places like Littlemore, Greater Leys, Marston & Headington, Hinksey, Osney and Grandpont with their terraced and semi-detached homes offer a wide choice of property for renting families.  Often, such properties have been licensed as houses in multiple occupation by landlords, and whilst that demand will continue, there will be growing demand for well presented, modernized family homes in the City’s private rented sector.

In addition to demand for family homes, I believe that there will be demand for longer tenancies and new models for renting.  I was alerted by a client and blog reader this week to ‘rent to own’ models that have become established in other markets, and which are gaining traction in the UK.  These are long-term agreements between landlords and their tenants, which provide the tenants with security of tenure, and the option to buy at a date in the future.  The landlord benefits from long-term, stable income and an assured future exit.  As government policy tightens, and investment returns reduce, landlords will demand stable, less volatile income streams, over the longer periods of time.  They will accept lower returns provided they are predictable and stable.  Tenants will remain in the rented sector through extended stages of their lives, and will also demand greater security of tenure, the ability to put down roots, personalizing their homes to their needs. 

We property professionals who work with, support and guide our clients with their property investments, need to be ahead of the curve to innovate and allows tenants and landlords to meet each other’s needs by enabling new models to be introduced. Failure to innovate by landlords, tenants and their agents will undermine the private rented market over the coming 5 years.

In Oxford, like the rest of England, around 20% of all homes are now rented.  A recent survey of people showed a decrease in the proportion of young people (under the age of 35) who own their own home, and separately another study showed an increase in the number of people who don’t ever expect to own a home.  Of greatest concern to first time buyers is their ability to save for the deposit required under the new mortgage lending rules.

So, what does this mean for Oxford’s private rented sector?  Firstly, growth in demand in the City seems likely to be sustained over coming years.  Whilst UK government policy is making life financially harder for landlords, it reflects a recognition that the private rented sector has become an important and permanent part of the urban housing landscape.  As more and more people depend on private rented homes for longer periods of their life, it has become important for government to appeal to this group of voters by being seen to help them (e.g via a future ban on fees charged to tenants).  It has also become much more important that the private rented sector can withstand a financial shock.  Bearing down on landlords with high levels of debt by increasing the cost of entry for new investment (via the stamp duty surcharge), and increasing the cost of debt (via the reduction of mortgage interest rate relief; and the introduction of tougher loan to value ratios), should reduce the long-term volatility in the sector.  How? Well, in the short-term as highly geared landlords choose to sell some or all of their portfolios volatility looks set to increase.  This may bear down on property prices for a period, but as far as government is concerned that’s OK – they welcome anything that reduces the cost of housing for owner occupiers.  Their calculation is that over the longer term, professional landlord’s – private and corporate, will fill the void, create a more robust private rented sector with long-term investment strategies and with sustainable levels of debt.

In Oxford, it seems likely that the impact of government policy will be felt more acutely because the entry cost of property is relatively high, the average rental yield is relatively low and landlord returns have been dependent on the capital appreciation of property year on year.  Because of that, rents in Oxford have risen more slowly, as landlords recognized the need to ease the rental cost for tenants during some tough years between 2008 and 2015, relying instead on predictable capital growth.

Looking forward, I believe that a significant trend in Oxford will be an increase in demand for rented family homes.  As tenants either choose not to buy their own property, or feel unable to save for a deposit, they will spend longer in the properties they occupy.  As their families grow they will look for different accommodation that better suits their needs, and location will be determined by different factors such as proximity to schools, access to commuter routes and child friendly open spaces.  Oxford caters well for this maturing and shifting demand.  Places like Littlemore, Greater Leys, Marston & Headington, Hinksey, Osney and Grandpont with their terraced and semi-detached homes offer a wide choice of property for renting families.  Often, such properties have been licensed as houses in multiple occupation by landlords, and whilst that demand will continue, there will be growing demand for well presented, modernized family homes in the City’s private rented sector.

In addition to demand for family homes, I believe that there will be demand for longer tenancies and new models for renting.  I was alerted by a client and blog reader this week to ‘rent to own’ models that have become established in other markets, and which are gaining traction in the UK.  These are long-term agreements between landlords and their tenants, which provide the tenants with security of tenure, and the option to buy at a date in the future.  The landlord benefits from long-term, stable income and an assured future exit.  As government policy tightens, and investment returns reduce, landlords will demand stable, less volatile income streams, over the longer periods of time.  They will accept lower returns provided they are predictable and stable.  Tenants will remain in the rented sector through extended stages of their lives, and will also demand greater security of tenure, the ability to put down roots, personalizing their homes to their needs. 

We property professionals who work with, support and guide our clients with their property investments, need to be ahead of the curve to innovate and allows tenants and landlords to meet each other’s needs by enabling new models to be introduced. Failure to innovate by landlords, tenants and their agents will undermine the private rented market over the coming 5 years.

Oxford house price inflation loses momentum

House price inflation in Oxford, like other big southern cities in the UK, has seen growth slip from double to single digits. London has reached its lowest level for five years,

The latest Hometrack UK Cities House Price Index revealed growth in London has dropped to 3.5%, a slowdown from the 13% registered in April 2016, giving an average value of £489,400.
Bristol, Cambridge and Oxford, previously top performers, have also seen price inflation slip into single figures, while in contrast the Midlands and northern England are topping the charts.

The average house price in Oxford over the last 12 months is now £407,248.  There have been 3,148 sales transactions over the same period which is 15% down on the same period 12 months earlier.

In comparison, Manchester recorded price growth of 8.4% during April where average prices were £155,000, followed by growth of 7.7% in both Leicester and Birmingham where values are at £164,600 and £152,100 respectively.

Across the top 20 UK cities, price growth has slowed in the past 12 months from 8.7% to 5.3%, with average prices at £247,400.

Oxford Landlord Seminar - Final reminder!

Landlord Seminar - Inheritance Tax Planning for Property Investors

1^st June 2017 at 6pm to 7.30pm at The Oxford Spires Hotel

In association with Martin & Co, Oxford & Twomey Wealth Management

Good afternoon folks,

I hope you are all well.

Just a quick and polite reminder of our upcoming landlord seminar. We have limited remaining places for this, but there are a few, so if you are interested in joining us then please call 01865 812110 or email info@OxfordPropertyBlog.co.uk to reserve your place.

We look forward to seeing you!

Best regards

Richard

What is the ideal ration of bedrooms to bathrooms?

The following article was published by Property Industry Eye.

I thought the following article might interest Oxford Property Blog readers.  I will publish an article later this week on a trend I believe to be important in Oxford - a developing trend for young families for rented family houses.  The article below provides home owners and landlords with an interesting input to decisions about property configuration to appeal to that market.

Direct Line surveyed 100 estate agents across ten of the UK’s biggest cities, concluding that a three-bed home would ideally have an average of 1.8 bathrooms, a four-bed would have 2.6 and a five-bed property would have 3.5.

Almost three-quarters (70%) of estate agents, believed a three-bedroom home should have two or more bathrooms, while 95% said a four or five bedroom property needs to have more than one bathroom, and 43% said a five-bedroom property should have at least three bathrooms.
The research includes estimates from estate agents that an extra bathroom would add 6.8% to the value of a standard three-bed property and 6.2% on to a four-bed.

Using the Hometrack UK Cities House Price Index average value of £208,200, the insurer concludes an extra bathroom could add £12,000 on to a three-bedroom property.

Rebecca Clapham, head of household products at Direct Line, said: “With space in such short supply in homes across the country and the cost of moving sky high, it is interesting to find out directly from the experts what home owners can do to add value to their property.

“A new bathroom can add around £12,000 to the value of a home, which compared to the cost of fitting one, is a significant return and may be a good option for people wishing to improve their home but without the space to add an extra bedroom or improve their kitchen.”

However, the analysis doesn’t seem to acknowledge how changing a bedroom into a bathroom could actually impact a property’s value, so EYE asked some agents.

Aaron Cambden, owner of Nottingham-based Fairview Estates, said: “Bedrooms remain the key focus and are more valuable than an additional bathroom, until you’re looking at property with four or more bedrooms; at this point, extra bathrooms do start to become a more important factor.”
Brendan Roberts, director at London agents Aylesford International, added: “In central London where values are high there is a commensurate expectation that a flat with two bedrooms has two bathrooms, three beds has at least two bathrooms, four beds at least two and preferably three baths, or even four.

“The higher up the price ranges you go, the higher the expectation in both specification and finishes and in the number and luxury of bathrooms, with every bedroom enjoying its own bathroom at the very high end.

“Occasionally, we see something referred to as a Jack ‘n’ Jill bathroom where one bathroom is en suite to two adjoining bedrooms with two doors – one giving access to each of the two adjoining bedrooms. This is quite acceptable, particularly on large family houses.

“I would not encourage anyone to ‘lose a bedroom’, which in most cases would reduce value, but occasionally a flat that hasn’t been modernised for many years may have three beds and only one bath, or is missing an en suite, in which case it might work to change to a two-bed, two-bath layout.”

Oxford to be affected by a fall in student numbers?

The number of students from the EU seeking places at UK Universities has fallen by 7%.  The first fall in over a decade.  A corresponding fall of 5.6% in the number of UK applications for University places seems certain to reduce demand for Oxford's student accommodation during 2017.

The Government's inclusion of foreign nationals studying in the UK within its manifesto promise to reduce immigration to the tens of thousand, seems certain to further discourage and decrease the number of non-UK students coming to our Universities to study.

I believe that the uncertainty caused by Brexit, together with widespread reporting of political emphasis on reducing immigration in the UK, has quickly impacted demand.  Students and their parents have become concerned about the welcome they will receive in the UK, and as a result are looking at alternative opportunities internationally.

Oxford University's Global standing, should mitigate some of this reduced demand for UK Universities, as should Oxford's broader reputation as a City of learning and knowledge.  However, the City will not be immune, and landlord's need to recognise that overall demand seems certain to fall.

Investment opportunity in Yarnton, Oxford

Good afternoon all,

GREAT CLOSE ROAD, YARNTON

I spotted this one for sale in Yarnton because at first it looked vaguely familiar to me and when I looked into the details I found out why!

This property was under my watchful eye for 4 years before it was sold on 18th March 2015 for £180,000. Clearly a popular little place because we only ever had the one tenant who remained for 4 years we had it!

Now on the market for £200,000 with Oliver James, Kidlington this property would fetch £795pcm and £825pcm. Against the current asking price this would give you a healthy 4.9% yield.

BUT!!!

In my humble opinion not at this asking price. Something doesn't quite add up. Most notably is the recent sales history.

On the 14th September 2016 number 33 Great Close Road sold for £155,000. Admittedly a fixer upper which did include needing new everything, but I am not sure this amounts to a £45,0000 increase.

In short and offer would be in order and if agreeable then you would have yourself a cracking little investment and it is clear that they do appreciate very well. Number 40 Great Close Road sold for £158,000 on 19th Oct 2007. 8 years later and through 2 recessions it has still made a tidy profit of £39,500.

Call me for more on this and others on my investment radar (including in house!)

Best regards

Richard

6,564,678 People use Oxford Train Station a year - How does that affect the Oxford Property Market?

It might surprise you that it isn’t always the nicest most picturesque villages around Oxford or the most desirable Oxford streets where properties sell or let the quickest. Quite often, it’s the ones that offer the best transport links. There is a reason why one of the most popular property programmes on television is called Location, Location, Location!

As an agent in Oxford, I am frequently confronted with queries about the Oxford property market, and most days I am asked, “What is the best part of Oxford to live in these days?”,.  Now, the answer can be different for each person – a lot depends on individual factors e.g. the age of their family, their age, schooling requirements and interests etc. Nonetheless, one of the principal necessities for most tenants and buyers is ease of access to transport links, including public transport – of which the railways are very important.

Official figures recently released show that, in total, 9,017 people jump on a train each and every day from Oxford Train station. Of those, 2,811 are season ticket holders. That’s a lot of money being spent when a season ticket, standard class, to London is £5,724 a year.

The bottom line is that property values in central Oxford would be much lower, by at least 3% to 4%, if it wasn’t for the proximity of the railway station and the people it allows access north and south of the City

Rail is becoming increasingly important, as the costs associated with car travel continue to rise and as the roads are becoming more and more congested. This has resulted in a huge surge in demand for rail travel.  

Overall usage of the station at Oxford has increased over the last 20 years. In 1997, a total of 3,064,352 people went through the barriers or connected with another train at the station in that 12-month period. However, in 2016, that figure had risen to 6,564,678 people using the station (that’s 18,035 people a day).  Hence the huge investment in capacity at Oxford parkway station where parallel investment in bus routes to/from Oxford has driven house prices in and around Kidlington, meaning that house price growth continues to track above the average for Oxford.

A property’s location relative to the train station has an important effect on its value and saleability in Oxford. It is also significant for tenants – allowing car-free living to be realistic in a City that wishes to limit car usage.

One of the first things house buyers and tenants do when surfing the web for somewhere to live is find out the proximity of a property to the train station. That is why Rightmove displays the distance to the railway station alongside each and every property on their website – they know it is in the top 5 criteria applied by buyers and tenants alike.  To illustrate this, recently a couple came to me looking for a property 5 minutes’ walk from Oxford station and 5 minutes’ walk to the central shops, restaurants and bars.  They wanted 2 bedrooms, one bathroom and wanted to keep the monthly rent to around £1,000.  In the event, they achieved their perfect location, but had to raise their budget by 20%, reflecting the premium that proximity to the stations carries.  They are now living just off St Thomas Street, just a few hundred yards from the Central station.

House prices hit record highs according to Rightmove

Average UK house prices rose 1.1 per cent to hit a new high in April of £313,655, according to the latest Rightmove house price index.The previous high was £310,471 set in June 2016.

A Rightmove statement says: “While the run-up to an election creates a degree of uncertainty and often a pause in activity, this strong set of figures should help mitigate pre-election jitters.”
The index found that first-time buyer sector is driving growth, up 6.5 per cent annually to a new record of £194,881 on average.

High buyer demand in most parts of the country has helped to propel the price of newly marketed property to record highs and there are signs of a strong spring market with the number of sales agreed achieved at this time of year being the highest since 2007. It remains to be seen what effect the run-up to the snap election will have, though any slowdown in activity will be counter-balanced by the market’s current fast pace.

Until we start to see the promises from this year’s Housing White Paper put into action, the cost of entering the homeownership club will continue to rise which might be great news for homeowners and landlords, but not for first-time buyers trying to break away from Generation Rent.

If you are interested in your property 'numbers' then please give me a call.

Best regards

Richard

Oxford rents rise by 22.6% since 2005

The Oxford Property Market has been particularly fascinating over the last 12 years when we consider what has happened to Oxford rents and house prices.

There’s currently much speculation about what will happen to the rental property market during the Brexit negotiation. I believe we must look what happened in the 2008/9 credit crunch (and what has happened since) to judge rationally the possible ramifications for long-term investors in the Oxford property market. An important, yet overlooked measure is the performance of rental income vs house prices (i.e. the resultant yields over time). In Oxford (as for the rest of Great Britain), notwithstanding a slight drop in 2008 and 2009, property rentals have been gradually and consistently increasing.

The income from rentals has been progressively increasing over the last 12 years. Today, they are on average 22.6% higher than they were at the beginning of 2005. In fact, over the last five years, the average growth has been 2.4% per annum. However, the observant readers will be noting that we are ignoring an important factor – our friend inflation.

Turn the clock back to 2005, and take a property being rented for say £900 a month hat is still being rented at £900 a month today, in Spring of 2017. While the landlord is not getting any less income, £900 is no longer worth as much. Let me explain, in 2005, £900 may have bought a two-week 4* holiday in Italy. Yet, holidays have increased in line with inflation (which has been 38.5% since 2005), so our holiday would cost today £1,246 (£900 + 38.5% inflation = £1,246). Therefore, the landlord could no longer afford the same holiday, even though they have the same amount in pound notes from their rental property.

This means, when we compare rents in Oxford to inflation since 2005, Oxford landlords are worse off today, when they receive their monthly rental income, than they were in 2005 by 15.9% in real terms (rents increased by 22.6% since 2005, less the 38.5% inflation since 2005 – net affect 15.9% drop). 

However, rental income is not the only way that landlords generate money from property as property values typically increase over time. Although in the short term, cash flows are diminishing, many Oxford landlords will be content to off-set that for the increase in capital value.

Property values in Oxford have risen by 77.3% since 2005

This equates to a very strong 6.44% average increase per annum over the last 12 years. This will make those Oxford landlords and investors feel a little better about the information regarding rents after inflation.  6.44% annual return compares well when considered vs alternative financial investments over the same period.

Looking forward, the prospects of making easy money on buy to let in Oxford have diminished.

If you are investing in the Oxford property market, do your homework and do it well. While some yields may look attractive, there are properties in many areas that do not have the solid fundamentals in place to sustain them. If you are looking for capital growth, you might be surprised where the hidden gems really are. Take advice, even ask your agent for a portfolio analysis like I offer my landlords.

Thoughts from a train

Sitting on a train to London provides space for contemplation.  April has been an odd month.  Demand has been impacted by Easter and bank holiday breaks, at a time when the availability of rental properties in Oxford is high.  Why so high?  It is the 12 month anniversary of the pre-stamp duty rush to buy last March.  Those new buy to let properties have added to the supply in Oxford in a month somewhat decimated by holidays.

What does this mean for landlords?  Well property fundamentals are based on location, condition and price (relative to comparable properties).  The location of a property is fixed and the exposure of a portfolio geographically can only be changed over the medium to long term.  Condition is not fixed.  Investing in the decor, general condition and quality of fixtures and fittings makes a difference at a time when tenants have choice.  If the condition can't be improved further to enhance the property's attractiveness, then only price remains.  

Prospective tenants are savvy, if they have choice they will assess value for money in relation to location and condition.  Landlords need to be honest with themselves and be just as savvy in assessing the rent they are seeking vs the competing properties.

Will rents fall in Oxford in 2017, for some properties, yes.  Is that a long term trend?  I think not.  Oxford tracks London but lags in terms of time.  London had a tough 2016, Oxford may follow in 2017.  I doubt we will see rent deflation across the board, but at the top of the market we may see pressure e.g central Oxford apartments if demand from foreign students is adversely impacted by the political focus on immigration.

So is Oxford losing its shine?  No, capital appreciation remains strong.  Accepting say 3% lower rent to avoid a void, will ensure an overall annual return of 6% plus when income and capital appreciation are combined.  For many without debt, this could rise to 8 % plus.

The thing to avoid is a void!

Landlord Seminar - Inheritance Tax Planning for Property Investors

1^st June 2017 at 6pm to 7.30pm at The Oxford Spires Hotel

In association with Martin & Co, Oxford & Twomey Wealth Management

Oxford’s landlords own valuable, appreciating assets.  Day to day, the focus is on maximising the income generated from those assets by optimising rental yield and minimising periods of void.  Most landlords expect to retain the ownership of their properties, seeing their appreciating value as an integral part of their plans for retirement, and part of the legacy that they will leave for their children and grandchildren.  In virtually all cases the value of their assets exceed £500,000 in many it exceeds £5m.

I can’t think of any other investment to which so little consideration is given to optimising the investment for tax particularly inheritance tax.  Most people don’t think there is anything that can be done now to better look after future generations, but the truth is that there are some easy, sensible and inexpensive actions that can and should be taken – all it takes is for someone to explain them!

And, that someone is Andrew Twomey, whose business Twomey Wealth Management, is part of St James’ Place Wealth Management partner practice.  Educated in the UK and in Australia, Andrew works with clients in London, Oxford and the Cotswolds to assist them to build, grow, protect and preserve their wealth.  Happily for us, he also has a really great way of explaining things in a simple and action orientated way.

So, if you own one or more properties in Oxford or elsewhere, and you have an inkling there might be more you could do to get your affairs in order -  please come along.  We start at 6pm and will run to 7.30pm, at the Oxford Spires Hotel on the Abingdon Road in Oxford.  Numbers are limited so please email me on info@OxfordPropertyBlog.co.uk to reserve your place.

Back in Silkdale Close, Cowley for this investment cracker!!

Well the number certainly work with this one folks.

On the market for £220,000 with Chancellors, Cowley you will expect to hit a rent of £975pcm on this which would give you a 5.3% return on your investment, assuming you purchased at asking price. As always is the case with my advice, I wouldn't!

I say this because even at a glance I think the property needs a re-dec and shower unit. Tap operated showers are not really what tenants want or expect for their money so money will need spending here. In addition to this some of the furniture needs an overhaul as well. I approximate spending around £2500 to bring this property to standard but a viewing would be good to further assess the condition. A photo can lie after all!

Other than the above it really doesnt have much of a downside. These are really shrewd investments. Just ask the previous owners of 21 Lizmans Court who purchased the property in July 2012 for £155,000 and then sold it on 10th May 2016 for £210,000 representing a 27% increase.

Good right?

Aside the work these flats are minimum fuss and a real hidden gem in Oxford for those of you looking to add to the current portfolio or purchase for investment for the first time.

Please feel free to call me for more information.

Best regards

Richard

The perfect investment in lovely Kennington

There are many reasons to consider village life - the quiet, nice walks, community feel and good local schools. Well in addition to all of this how about a village that offers close access to Oxford Centre and is also conveniently placed for routes out of Oxford?

Step forward Kennington!

This cute little one bedroom property on The Avenue is currently on the market with Simpsons in Abingdon (??) for £250,000. It is worth a second (and third) look.

Internally it is very hard to fault so no major work necessary here to property itself or the furnishings, assuming they get thrown into the equation!

Its garden is lovely and a real draw for potential tenants as well.

You are looking at £925 and £950pcm which gives you 4.5% yield assuming asking price but an offer is always worth it.

Behind city centre and North Oxford, Kennington tends to be the most sought after location in our area.

Happy to talk about this one and others folks!

Best regards

Richard

A little gem in Reliance Way, Cowley!

Good afternoon all,

I hope you are well.

I spotted this one in Cowley. I am sure you locals in Oxford will know Reliance Way quite well and what was true in 2010 is still true now......It makes for a cracking investment!

You can find this one on the market with Chancellors for £350,000. Recent selling history saw one sold on the 1st July 2016 for £340,000 and prior to that number 144 Reliance Way sold for £347,000 on the 26th April 2016. In short the price is thereabouts but that should never deter you from an offer!

The going rental rate for this apartment is £1295 - £1325pcm. At the lower end (always cautious me!) which gives you 4.5% on the yield.

Internally it looks sound but this will need a viewing to inspect closer. If it is as it is presented in the pictures then you will need very little done to it.

With the recent house price index from March to April reporting a slowing down in annual property growth, now could be a very good time to jump in there with an offer on this apartment. It has a rich rental history throughout the block and very rarely do you see voids on these units.

Call me if you would like to know more.

Best

Richard

Legal questions raised about online estate agents

This was first reported by Property Industry Eye:

A leading barrister has raised several questions about the duties owed by online estate agents to their customers.

In the Opinion, prepared for the UK PropTech Association (UKPA), Ian Rees Phillips of 6 Pump Court explores how the nature of up-front payment for estate agency services may create a conflict of interest between the online estate agent and property vendors.

The opinion concludes that the online agents owe a fiduciary duty to home seller clients and that there is a “significant danger that breach of fiduciary duty is baked into the online estate agent model.”

Those online agencies who operate with self-employed agents in the field are in even more “danger” of their clients “bringing a claim” against them.

Eddie Holmes, chairman of the UKPA, said: “It is extremely important that founders operating new business models, enabled by technology, bear in mind the legislative environment in which they operate. The world of PropTech is no different to any other in this regard.

“This Opinion  by Mr Rees Phillips serves to highlight some fundamental questions about the online agency business model.

“We urge those businesses operating in this space to consider these questions as a matter of priority and communicate what steps they take to protect their customers – something which should, ultimately, help those businesses create competitive advantage for themselves.”

Oxford Property Blog believes that this relates primarily to their financial model whereby fees are taken up-front irrespective of whether a property is sold.  It is reported that some online agents sell just 30% of the houses they list, meaning that 70% of vendors pay the agent a fee, but fail to sell their house.  Whereas, most high-street agents only charge a fee on the completion of a successful sale and they would routinely budget to sell no less than half of the properties they list, with the best-performing achieving 60% or more. 

The online model breaks the link between the vendor's financial interests and that of their agent - no sale: no fee ensures those interests are aligned throughout the process.  Up-front fees, reduce the need for online agents to remain focussed and committed to a successful completed sale, and may encourage above-market valuations of property in order to secure a listing.

Rental trends reported by RIghtmove

Based on Rightmove data, there are 12% more properties available for tenants to choose from compared to the first quarter in 2016.

Nationally, it is taking 10% longer on average to secure tenants than during the same period last year.

In the SE of England, compared with Q4 2016, there has been a 1% reduction in average achieved rent, whereas compared to the same period last year rents are up 1.3%.

Oxford typically tracks the London market quite closely, albeit with a lag and with lower valued peak rents.  Looking at London, compared with rents in Q4 2016, rents in Q1 2017 are up 1.5%, however, when compared to the same period in 2016 rents are 4.2% down.  To date, Oxford rents have held-up well, however, properties are currently taking longer to let than during the same period last year.  Following the buy to let buying spree in March last year, those properties are now coming available, increasing the availability of properties and offering tenants more choice.

Will Oxford experience the falls in rent experienced in London?  Well, I don't have a crystal ball, but on balance I'd predict a period of low growth in rents and for some properties stagnation.  However, I would expect demand to hold-up reflecting the under-supply of homes and the strong fundamentals of the City's economy.

I expect one bedroom properties to hold-up the best with larger properties from 2-bed apartments upwards taking a little longer to let.  Landlords should not panic, but should be open to accepting offers from tenants, recognising the benefit of prolonging a void period.

Demand for professional HMO properties is likely to remain strong, with tenants demanding a high quality of fit and finish, and good quality, well-equipped communal areas and en-suite facilities.

Rooms  without en-suite facilities, or within homes that are rather tired in terms of interior décor and facilities are most likely to be hit by the reducing demand given the narrowing of the gap between top-priced rooms and one-bedroom and studio apartments.  The cost of renting a room in Oxford is very high, and I'd expect to see some.

The lowest fixed mortgage rate in 5 years!

Morning all, We thought you may be interested in this offer. Fresh from our recent landlord seminar at Oxford Spires Hotel, and with the new tax changes now officially in force, now is a very good time to be looking at your current circumstances to determine the best way to protect your biggest investments. Lowest 5 year fixed rate in history... by a mile The lowest ever 5 year fix was launched today at 1.29%. We're assured it's not a mistake but you can be certain it won't be available for long. Arrange a callback with one of our advisers on our website. Representative example: A mortgage of £193,051 payable over 23 years, initially on a fixed rate for 5 years at 1.29% and then on a variable rate of 3.75% for the remaining 18 years would require 60 payments of £809 and 216 payments of £1,045. The total amount payable would be £275,160 made up of the loan amount plus interest (£81,209) and fees (£900). The overall cost for comparison is 2.83% APRC representative. Earlier in the week Nationwide announced that house prices had dropped in March for the first time in almost two years. Bear in mind though that the House Price Index for the whole of the UK had risen 15% in the last 2 years and 30% in the last 4. How does this affect me? If you aren't looking for a new property and are happy in your home it's easy to ignore the UK housing market. However, increasing property prices can affect your mortgage in a positive way. An example Say you bought a property for £200,000 in 2013 and took out a 90% mortgage (£180,000) over 25 years. 4 years later, if the property has increased by the UK average of 30% it will now be worth £260,000. Even if none of the mortgage capital had been repaid this is a new loan to value (LTV) ratio of 70%. And a lower LTV ratio means less risk for the lender and therefore a better rate for you.  How much can I save? You can use our house price calculator to work out the change in your area and our best buy tables below to work out the potential savings. Happy Easter everyone! Residential Best Buys Buy To Let Best Buys

If you would like more information about this please feel fre