Last year felt like the first year since the pandemic began that Covid-19 was not the focus of the Oxfordshire Letting Market. However, there was plenty of political and economic activity which did impact the market: three Prime Ministers, four Housing Ministers, Michael Gove being sacked then reappointed as Housing Secretary, and we won’t revisit the Truss mini-budget…
This instability has directly affected the housing market and also meant there has been little progress on the Rental Reform Bill. However, there felt to be some steadying of the political ship towards the end of the year, and we hope for more clarity around housing policies this year. The current economic environment makes forecasting tricky, but here is our considered view of the private rented sector (PRS) for the coming year:
Supply of rental property
A chronic lack of rental properties has been felt across the country over the last couple of years. A number of factors contributed to this, including a shortage of houses being built. This is not just a pandemic-related issue – in Oxfordshire, just 26,050 permanent private enterprise dwellings have been completed over the last 10 years1. On top of this, a number of landlords exited the market throughout the 2020-2021 stamp duty holiday, reducing stock. This levelled off in 2022, and we have seen an increasing number of investor landlords returning to or entering the marketplace (see later section on investment) which will continue to bring welcome stock to the market.
Supply from failed sales
Lloyds Banking Group – the UK’s biggest mortgage lender – has predicted that national house prices will fall by 8% in the next year. Whilst this is a minor decrease compared to the huge increases during the pandemic, historic trends show that when the housing sector contracts more people rely on the PRS: at the start of the financial crisis in 2008 property sales volumes across England fell 49.3% year-on-year, whereas privately rented stock rose by 8.32%2. As the sales market potentially softens, more landlords and homeowners who are struggling to sell may turn to letting, as has happened across Oxfordshire in recent months:
Continuing strong demand
The lack of supply has been compounded by tenants moving less frequently because they can’t find another home to move to (or current rent levels mean they’re better off staying put). Higher interest rates and inflation making it harder to borrow means some tenants who may have been thinking about buying in 2023 will reconsider. The number of enquiries we receive has increased by an average of 87% since 2019 (see below). Though it seems obvious that demand will continue to outstrip supply as we enter 2023, it’s hard to say whether it will increase further year-on-year.
Rents and bills included
The drop in supply in the face of strong demand pushed rental prices up throughout 2022, with average rent increasing by 6.0%3. If supply continues to lag behind demand, we predict rents will continue to grow, though not at the same pace as last year, given the cost of living crisis. The exception may be if more rents start to include the cost of bills. In our last Letting Market Report we reported an increase in the popularity of rents with bills included. A recent Rightmove report shows that, across the country, tenant searches for ‘bills included’ increased 57% year-on-year4 so this trend is likely to continue.
Rental Reform Bill
According to Michael Gove, the long-awaited Rental Reform Bill “should come in 2023”5. All elements of the Bill will be subject to consultation, which means some measures may not become law until 2024 (the next General Election). The headline issue – abolishing Section 21 – could well be taken out of the Bill and dealt with separately to ensure it is accelerated this year. The aspiration is for this Bill to improve living conditions for tenants, clamp down on rogue landlords and ultimately build confidence in the industry.
Investing in property
Investors bought 12.2% of homes in 2022 – the highest level since 2016 – the year the 3% stamp duty surcharge was introduced6. Strong rents and a slowing sales market means that investors have a great opportunity to pick up deals with good returns in 2023. Oxfordshire has seen consistently good capital growth, and rents are predicted to stay strong as is rental demand. We passionately believe that this county is a fantastic place for property investment. If you’re considering starting or expanding your BTL portfolio in 2023, contact us, or join our Investor Club at /investor-club
Developments in Oxford
Developments across the city will progress in 2023 – whether that be in planning or construction – further bolstering the city’s appeal to tenants.
- The initial infrastructure construction work at Oxford North – a development to the north of the Wolvercote roundabout – is expected to be completed in January, and the construction of the first 317 new homes on Canalside is scheduled for early 2023.
- A consultation was held in September around the Oxpens site in the city centre. OXWED, the team behind the proposals, was expected to submit a planning application to Oxford City Council in late autumn and we await further news on this scheme in 2023.
- Another project identified in the Oxford Local Plan is the reopening of the Cowley Branch Line to passengers, which would include two new stations (south and east Oxford) and enhanced rail connectivity to Oxford, Bicester and beyond. Oxford City Council recently approved a £4.56m package to fund the detailed design and feasibility works required for this project. This is in the early stages of the project, and we will monitor its progress throughout 2023.
- In December the City Council also approved plans for 402 new homes, a hotel and a business innovation centre to be built on the edge of Oxford, as part of a new development near Thornhill Park and Ride.
The importance of landlords
This county – and particularly the city – has a very transient population and not everyone wants to buy here. Many people rely on the PRS (49.3% of all Oxford’s homes are now privately rented7), so the role of the private landlord is vital. A more stable financial market should bring a more settled environment for landlords and investors this year, and we hope to see the Government encouraging landlords to remain in the sector to improve supply.
1 Source: www.gov.uk/government/statistical-data-sets/live-tables-on-housebuilding
3 Internal Finders Keepers data
5 Hammond, G. (2022) Protections for England’s tenants won’t be in place until 2023, says Gove, Financial Times, 24 November, available at: https://www.ft.com/content/51528fe4-8d98-4dc9-a2f0-f22c70df2d06 (Accessed: 21 December 2022)
6 Hamptons Monthly Lettings Index – November 2022
For more information and an up to date view on the Oxfordshire letting market please email email@example.com.