Oxford is a favourite place for people moving out of London

The number of people leaving the capital has reached a 5-year high, with net departures to homes elsewhere in the UK reaching 93,300 people in the year to June 2016 – an increase of more than 80% on five years previously according to the ONS.

Apart from people in their 20’s there is a net outflow across all age groups with thirty-somethings being most likely to look for somewhere more affordable to buy a family home.

Those who live in the Capital’s richest boroughs are more likely to move to more affluent areas.  People in Kensington and Chelsea tending to move to Cambridge; Westminster residents heading to Oxford and those in Hammersmith and Fulham moving to Elmbridge in Surrey.  Other popular places for relocation include St Albans and Slough.

It is perhaps no surprise that the popular new places remain within communing reach of London, and have vibrant community, social and cultural attractions.  As I have predicted in this blog, these people are looking for family homes or 3 beds or more, ease of access to train and road links to London, and proximity to open spaces, supermarkets and social venues. I expect to see these properties to increase in popularity for both buyers and renters over the coming 2 or 3 years.

The boards begin telling the story this summer

A good afternoon to you all,

It's well documented that we have witnessed a gentle slowing in our rental and as you know it is something we have been very keen to share with you all both through social media and direct conversations. 

Much has been suggested about the reasons behind this change in our market and adding further to this change Is  a cooling in the lettings board activity leading to the markets busiest period.

In a recent report of Agency Expresses‘property activity index’ shows that while figures for new listings in the ‘To Let’ category did see a marginal increase of 0.9 per cent, ‘Let’ properties fell 1.9 per cent. 

Over a three-month rolling period figures recorded across the UK remain down with new listings dropping 2.3 per cent and properties ‘Let’ down 4.9 per cent. Records also show the figure for properties ‘Let’ during last month is at its lowest June level since 2014.

Only five of the 12 regions recorded by the index reported increases in new listings ‘To Let’ and properties ‘Let’.

This month’s top performing region was Central England. Figures for new listings ‘To Let’ sat at a robust 25.4 per cent increase, marking the region’s largest month on month increase for June since the index began in 2012.

Over a three-month rolling period Central England remained at the top of the leader board with figures for new listings sitting at 4.9 per cent up.

The largest declines in this month’s Property Activity Index were made in the North East. New listings ‘To Let’ fell by no less than 23.5 per cent as did properties ‘Let’ down 26.1 per cent. 

The next 3 months in this busiest period will truly determine how affected our market has been by the recent legislative/government changes and what we can expect for the remainder of 2017.

Oxford is one of 13 UK cities experiencing lower growth in house prices than a year ago according to Hometrack

13 cities have a lower annual growth rate than a year ago with London, Bristol and Oxford recording the greatest slowdown as affordability and political uncertainty impact demand.

The average prices of a house in the UK’s largest cities increased by 5.1% in the 12 months to June 2017, but growth in London slowed to 2.6%, the lowest rate for over five years.

The annual growth is down from the 8.8% recorded in June last year although it is still robust in larger northern cities such as Birmingham, Manchester and Edinburgh, according to the figures from the latest Hometrack cities house price index.

Growth in the first half of 2017 ranged from 0.2% in Aberdeen to 6.1% in Birmingham and while price growth is higher in seven cities, the scale of the increases compared to June 2016 are more modest.

Prices in Cambridge were up just 1.9%, in Oxford by 2.1%, in Newcastle by 2.4% and in Aberdeen were down 2.7%.

Sustained house price growth in large regional cities has pushed house prices ahead of their 2007 peak in 16 of the 20 cities covered by the index.

Looking ahead to the second half of 2017 the report suggests that even with a material slowdown in the rate of house price growth across south eastern England, house price inflation is holding up despite the squeeze on real incomes and uncertainty around Brexit.

At the end of 2016 Hometrack predicted that city house price growth over 2017 would be 4% but on current trends the firm now expects this to be closer to 6% or 7%. ‘There remains material upside for house prices outside south-eastern England.

Cities such as Bristol, Oxford and Cambridge are seeing slower growth but this is probably due to prices having risen strongly over the last decade, widening the gap with average earnings and impacting affordability for many people.  Major University towns are also braced for reduced demand from foreign nationals for places in their institutions.

It is worth pointing out for readers’ clarity that the headlines sometimes mask the fact that it is a reduction in GROWTH as opposed to an absolute reduction in house values.  At 2.1% Oxford house prices struggled to keep pace with inflation, but continued to grow ahead of earnings, exacerbating the affordability gap for many people, forcing many to live outside of the City commuting in daily by car, train and bus.

Is the Oxford Property Market stalling?

Everyday thousands of column inches are being used to make comment on the UK housing market.  As is usually the case, the headlines are overwhelmingly full of foreboding – after all good news doesn’t sell!  But, what is the true picture for Oxford?

Oxford remains the UK’s least affordable city for residents to buy a house, with an average house costing over 16 times average income.  So Oxford is prime for the building of new homes right?  Well, no!  Over the last 3-month period new build homes in Oxford accounted for just £1.27m of £217m value of homes sold in the City – that’s just over half of 1%!  And, therein lies the real challenge for Oxford, which now has 45,000 people commuting daily many traveling because they can’t afford to live closer to their workplace in the City.  This in turn is causing road congestion, rail congestion and long bus journeys.  It is driving a new growth segment in the Oxford rented sector – that being professional Houses in Multiple Occupation (HMO) – shared houses for young professionals who can not afford to buy or rent their own property, but no longer want to live like they did as a student.

So, house sales are booming then?  Well, no!  The table below shows data for key Oxford post codes, over the last 12 months, compared with the 12 months previously.  The analysis shows that whilst prices have continued to rise for the most part, transaction volumes a down significantly, suggesting that more people are staying put, with fewer people being able to buy a home in the City.  To date, prices have held-up strongly, because the reduced supply is balancing-out any reduced demand for new homes.  However, in April Hometrack UK City index reported that Oxford had slipped into negative house price growth, with the May 2017 report just tipping into positive territory at 1.6% year on year (YoY) growth vs. 8.2% YoY growth in May 2016.

Postcode/Town	Average value (£)	% change in value	Number of transactions	% change in transactions
OX1	460,407	12%	214	-48%
OX2	538,814	2%	490	-29%
OX3	406,212	7%	372	-37%
OX4	345,006	6%	578	-27%
OX5	344,416	-1%	366	-9%
Bicester	329,745	6%	1,077	-13%
Banbury	292,016	7%	2,756	-16%
Abingdon	328,638	6%	3,873	33%
South East England	307,611	9%	30,325	-51%

An important part of the Oxford property market is accommodation for the City’s 30,000 students.  With Universities announcing increases in tuition fees, and a net reduction of 4% in student applications with applications from the EU down over 5%, the City may experience a surplus of student accommodation, reversing the under-supply of recent years.  Together with the ban on fees charged to tenants by landlords and their agents which will be introduced by the Government, the City’s student landlords are certain to experience greater competition when attracting tenants, and an increase in costs.  The best way for such landlords to compete will be to invest in their properties offering better fixtures, fittings and décor, reflecting feedback from their agents about what students demand.  For many, it may be more sensible to re-fit and re-configure their property to appeal to the growing market for professional sharers mentioned above.  This sector demand en-suite facilities, large double bedrooms and well fitted, large communal kitchens.

In summary, Oxford prices have held-up to date, but show signs of weakening.  Oxford remains top of the charts for unaffordability, and the continued lack of new-build affordable homes is pushing demand to outlying towns and villages.  Demand for rented accommodation is changing, and the City is suffering reduced demand from foreign nationals wishing to live and study in the City.

Oxford property prices

This article was published in the Oxford Mail on 20/07/2017 and is re-published in full).  
Hi everyone, I thought the article below would be of interest!

OXFORD has been highlighted as one of five top growth areas for house prices over the past decade.
Growth in UK house prices has slowed in 2017 but new figures released by the UK House Price Index showed prices in Oxford rose by 43.5 per cent over the past decade.
Cambridge showed the second-highest increase over the decade with a 55.9 per cent increase, behind London with 61.7 per cent.

In Oxford in 2007/2008 the average house price in Oxford was £289,855, compared to £415,527 in April.

Kate Faulkner, property expert on website propertychecklists.co.uk, said: “It’s clear that property prices continue, in the main, to slow.

“Rightmove’s lead indicator on how sellers are feeling suggests that asking prices have reduced for the first time since 2009, although there is a ray of light coming from Nationwide and Hometrack, suggesting a slight uptick this month.

“In reality, what we are seeing is a natural slowdown from the recovery in the South and East, while in the rest of the UK prices have done well in the last few years, albeit not as robust as their southern and eastern counterparts.”

Ms Faulkner added that property market analysts Hometrack said this month that “the annual growth rate in London (3.3 per cent) was at the lowest for five years, but with signs of ‘bottoming out’.
The cost of the average home nationwide still increased by 4.7 per cent in the year to May 2017.
Office for National Statistics figures showed a drop from the 5.3 per cent rise in the year to April, with the average UK house price £221,000 in May.

Investment opportunity in central Oxford

Morning all,

Back on the investment trail and there's no better place to start than OX1. For tenants Kennington is a real winner. It offers quiet village setting with local conveniences, and is within 5 mins drive to Oxford centre. It is also the right end of town for the A34.

https://c.zoocdn.com/dynimgs/listings/resized/265802916/1024x768?primary_brand=zoopla


The most appealing part however is the rental price is attractive to tenants because it's considerably cheaper than most in central Oxford.

On the market with Chancellors you can expect a rent of £895 for this one. If you are to believe the selling agent then you'll have to pay over the £250,000 to get it. Is that right? Well on August 9th 2016 a one bedroom property in this development sold for £225,000. Fast forward 11 months is a one bed flat now worth over £25k more? The market decides that but in this market you'd have to be confident with an offer.

If successful you've got yourself a real winner. No internal decor needed and ready to rent.

A great apartment in a great location, oh and it's also got parking!

Call me for more on this and others.

Best regards

Richard

The Oxford Property Market, The Beatles, Sweden and 50 year mortgages

50 years ago, in 1967, the first human heart transplant was performed by Dr Christian Barnard in South Africa. In the same year, Sweden switched from driving on the left-hand side to the right-hand side of the road. The average value of an Oxford property was £6,730, interest rates were at 5.5% and The Beatles released their Sgt Peppers album.  But what the hell has that to do with the Oxford property market today? Quite a lot actually - let me explain my friends!

I have been doing some research on the current attitude of Oxford first-time buyers.  First-time buyers are so important for both landlords and homeowners. If first-time buyers aren’t buying, they still need a roof over their heads, so they rent (good news for landlords). If they buy, demand for Oxford property goes up for starter homes and that enables other Oxford homeowners to move up the property ladder.

First-time buyers are the lifeblood of the property market. They are, however the most susceptible to interest rate rises and the affordability of mortgages. With that in mind, let us see what is happening to them…

The average value of an Oxford property is currently standing at £507,468 and UK interest rates at 0.25%. As each year goes by, it appears the age of the everlasting mortgage has started to emerge, prompted by these first-time buyers, eager to get a foot on the housing ladder. I was reading a report a few days ago where some mortgage companies confessed that the battle to gain big returns from the property market has led to mortgages that will take considerably longer than the customary 25 years to pay off.

Over the last few years, it has been commonplace for first-time buyer mortgages to be 30 and 35 years in length as the ‘Bank of Mum and Dad’ have been helping with the deposit. Now, some high street banks are offering mortgage terms of 40 years. This means first-time buyers could be paying until their mid-60’s.  So, a 50-year mortgage does not seem as far-fetched now as it would have been back in the 1970’s. After all life expectancy for a male then was exactly 69 years and today its 79 years and 5 months!

Over the last ten years, Oxford property prices have continued to rise more than wages, therefore, first-time buyers are looking for bigger loans. If this development continues, the only way repayments can remain reasonable is by increasing the term of the loan.

However, some commentators have said they are worried the mortgage companies are lending money over such a long term, because they threaten leaving some first-time buyers with a generation of debt if the house price bubble bursts.  Interestingly, when I looked at what had happened to average property values in Oxford over the last 50 years, there have been bubbles. First-time buyers should take heart, since as a county we have always recovered from it a few years later.

What if interest rates rise? Well looking at historic UK interest rates, the current rate of 0.25% is at a 300-year low. Mortgages will never be cheaper. I would however, seriously consider fixing the rate to cushion any future potential interest rate rises (since they can only go in one direction when they do change). If Oxford first-time buyers see buying a home as a long-term decision, based on the last 50 years, they should feel very confident that their asset will increase in value over the term of their loan!

Landlords, review your borrowing, lock-in low interest rates and beat the September PRA changes that will restrict your access to funds

The next round of the Prudential Regulation Authority (PRA) changes are on the horizon, with portfolio landlords (with 4 or more properties) set to feel the most impact. We understand that the new rules will include properties owned by all entities, both personal and Limited Company. New rules mean that lenders will consider the whole portfolio when calculating stress tests.


Apparently, each property will be stressed at 5.5% - even properties not subject to the loan, which could have an impact on the amount landlords will be able to borrow.

Martin & Co Oxford work closely with London & Country the UK mortgage broker with the largest panel of lenders.  With interest rates at an all-time low, and with commentators expecting the next move to be up, there has never been a better time for landlords to review their borrowing arrangements to beat the more restrictive rules that will be introduced in September, maximising their borrowing, and locking-in the current favourable rates.

If you feel you might benefit from re-financing, either give us a call on 01865 812110 to ask us to arrange for a London & Country experienced mortgage consultant to call you for a confidential telephone assessment of your needs.  Or, call London & County direct providing reference 'Martin & Co, Oxford' by calling 0800 953 0304.

Historically UK borrowers have been reluctant to change their lender, but just like your utility provider, the best deals often result from switching, and at a time when landlord costs are rising, saving £00's per month or borrowing additional £000's can make the difference between growing a portfolio and not.  You lose nothing by calling and finding-out.

Oxford Buy-To-Let Predictions up to 2037

On several occasions over the last few months, in my Oxford Property Blog, I have touched on the fact that the rate of rental inflation (i.e. how much rents are rising by) has eased over the last year. At the same time I flagged that in some parts of the UK rents had actually dropped for the first time in over eight years. Research backs up this prediction.

Rents in Oxford for new tenancies fell by 0.4% in the last 12 months (i.e. not existing tenancies). When we compare that current rate with the historical rental inflation in Oxford, an interesting pattern emerges:

·       2016 - Rental Inflation in Oxford was 5.1%

·       2015 - Rental Inflation in Oxford was 9.4%

·       2014 - Rental Inflation in Oxford was 3.2%

The reason behind this change depends on which side of the demand/supply equation you are looking from. On the demand side (from the tenants point of view) there is the uncertainty of Brexit and the fact that salaries are not keeping up with inflation for the first time in three years. Critically this means tenants have less disposable income to pay their rent. As an aside, it is interesting to note that nationally, rent accounts for 29% of a tenant’s take home pay (Denton House).

On the supply side of the equation (landlords point of view) Brexit also creates uncertainty. However, the biggest issue was a massive upsurge of new rental properties coming on to the market in late 2016, caused by George Osborne’s new 3% stamp duty tax for landlords in the first part of 2016. This meant a lot of new rental properties were ‘dropped’ on to the rental market all at the same time as landlords scrabbled to buy before the new tax was introduced. The greater choice of rental properties for tenants curtailed rental growth/inflation. A slight softening of Oxford property prices has compounded this.  Figures from The Bank of England suggested that first time buyers rose over the last 12 months as some were more inclined to buy instead of rent. Together, these factors played a part in the ongoing moderation of rental growth.

The lead up to the General Election in May didn’t help: after all, people don’t like doubt and uncertainty. So now that the government has a mandate for going forward over the next 5 years hopefully that has removed any stumbling blocks stopping tenants making the decision to move home. Although, it hardly feels like a 5-year government!

Whether it be ‘hard’ or ‘soft’ Brexit (and with the Election result the Tory’s might have to be ‘softer’ on those negotiations) the simple fact is, we aren’t building enough properties for us to live in. Both in Oxford, the South East and the wider UK, long-term population trends imply that rents will soon be growing faster than inflation again. Look at the projections by the Office of National Statistics.

Population Estimates for Oxford City Council over the next 20 years
2016 (actual)	2021	2026	2031	2036
161,870	166,412	171,231	176,689	180,045

Tenants will still require a vibrant and growing rental sector to deliver them housing options in a timely manner. As the population grows in Oxford, and further afield, any restriction to the supply of rental properties (brought about by poor returns for landlords) cannot be in the long-term best interest of tenants. Simply put rents must go up!

I see this as a short-term blip and rents will continue to grow in the coming years. With rents only accounting for 29% of a tenants’ disposable income, the ability for most tenants to absorb a rent increase does exist.

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.