Although the last two years may have felt relatively static for many, the Oxfordshire letting market has been extremely active, with the pandemic impacting all sorts of factors in different ways. We would not be so bold as to claim we know what is in store for 2022, but we have taken a measured view of the private rented sector (PRS) for the coming year.
Delayed Rental Reform
The Department of Levelling Up, Housing and Communities is so wide-ranging that it’s no surprise that rental reform was pushed back from last autumn. Now expected in the spring, the proposed reform would see some of the biggest changes in the private rented sector for decades. Having more than doubled in size (see graph below), the PRS is ripe for an update, but changes that deter landlords would have a negative impact for tenants in the long run.
Abolishing Section 21: Part of rental reform includes the proposed removal of Section 21 notices to end ‘no fault’ evictions. This would be a big change to the PRS and would need to be replaced with comprehensive grounds under which landlords can legitimately repossess their properties easily, quickly and cheaply, otherwise it could strangle the supply of homes and drive rents up.
Lifetime Deposits: These are deposits which move with the tenant from property to property and were presented in the original reform proposal, yet there has been no clarity as to how the scheme would work. Without an insurance to back it – such as the Government acting as guarantor – we see this only negatively impacting the lower end of the market, as landlords will likely end up choosing the applicant who can afford the deposit rather than taking the risk, as is the case with the current Zero Deposit schemes.
Although the Omicron variant might delay a few people’s moves early in the year, what we have learned over the pandemic is that more time spent at home means more time to reassess living accommodation. The trends (such as ‘London-to-country’ and the ‘search for space’) have been widely reported throughout the last year or so, and we foresee them continuing into 2022 as people try to ‘lockdown-proof’ their home.
Hybrid working is also likely to develop further into 2022. As offices confirm working processes, more people will reflect on the opportunity to move – either to a property with space to work from home or to a new area that better suits their lifestyle.
Improving Energy Performance
In 2021, changes to the Minimum Energy Efficiency Standards (MEES) were announced that will affect landlords and rentals from 2025. The ultimate goal is to help the UK achieve net zero by 2050 by introducing policies such as all privately rented homes achieving an EPC rating of at least C by 2028. The advice will vary from property to property – not least because some landlords may have installed new windows or a new boiler since they had their last EPC – so we would suggest talking with your Property Manager. If you are planning any upgrade works in the coming year, it’s worth considering how you could improve the EPC level within the project.
The construction of Oxford North (a development to the north of the Wolvercote roundabout, which will create around 4,500 jobs and 480 new homes) began last summer, and other larger developments will also move forward in 2022.
1. Catalyst Bicester: Phase 1 of the new business community designed for technology industries and high-performance engineering companies is expected to be ready for occupation in early 2022. Fitting in with Bicester’s growth plans over the next decade or so, this site should bring more great tenants to the town.
2. South Oxford Science Village: Plans are being drawn up for a 3,000-home development on Grenoble Road in Oxford. The site was given the green light to start initial plans last October, and a formal application will be drawn up this year and likely submitted in 2023.
3. Oxpens: a ‘new quarter’ set between Oxpens Road and the river. The space will include potential for around 186 apartments as well as student rooms, and office and lab space. The final consultation took place in November and the planning application submission is expected early this year.
The right time to invest
The rental market has thrived throughout the pandemic, with demand remaining consistently high, properties letting quickly and strong rents being achieved. For example, we helped an investor to acquire a 2 bedroom terraced house on a new build site near Bicester (see main photo). Our team in Bicester marketed the property at £1,300pcm and it let on the first viewing to a professional couple and the investor is receiving a 4.8% gross return.
For investors, solid capital gains have been achieved over the last two years in Oxfordshire, with house prices increasing by 15% (see graph below). Continued demand for more space will keep driving house prices higher, with values across the country set to rise by up to 3.5% a year between 2022 and 20241, and rents are also predicted to increase by 2025 according to the Propertymark Housing 2025 report2. For those considering investing in property, now is a good opportunity to benefit from further growth in the coming years. Investing is unique to each individual, so if you are considering acquiring property or expanding your portfolio, contact our Inspired Sales and Acquisitions team – email@example.com
Rental price growth reached its highest level for 13 years during Q3 20213 due to the continued imbalance between demand and supply. We anticipate rental demand remaining strong into 2022 due to factors already mentioned in this report (pandemic trends increasing demand; increasing house prices deterring tenants from moving out of the rental sector), but there is also a fundamental under-supply of rental property as buy-to-let landlords are not coming to the market at the same rate as they did pre-2016. The imbalance of supply and demand will continue to support rent prices on both new lets and renewals.
The Need for Housing
A lack of housing supply is pushing rents up and causing affordability issues, but the issue is that landlords who supply the stock are being squeezed more and more. Whilst we wholeheartedly support improving standards in the PRS, it needs to work for both landlords and tenants. Making property investment less attractive will only lead to a further lack of supply, which could create unintended consequences to the detriment of tenants. Responsible landlords should be supported to provide the homes that are needed, otherwise tenants will face less choice and higher rents.
Selective Licensing Oxford’s Selective Licensing Scheme was approved by Oxford City Council last year, and is being put before the Ministry of Housing, Communities and Local Government (MHCLG) for approval. There is no guarantee it will be approved, but if it is then it would likely begin in spring 2022. We will keep our clients updated.
For more information and an up to date view on the Oxfordshire letting market please email firstname.lastname@example.org.
1 https://www.theguardian.com/money/2021/sep/27/uk-house-pricesforecast- to-rise-by-up-to-35-a-year-between-2022-and-2024
3 Zoopla Q3 2021 | UK Rental Market Report