Quarter 3 of 2022 was full of activity: a new Prime Minister; a new Minister of State for Housing (our 13th in 12 years); the resignation of Eddie Hughes, the ‘architect’ of the rental reform white paper (potentially leading to further delays); and the introduction of Selective Licensing in Oxford city to name just a few headlines. The chronic shortage of properties to let in Oxfordshire has continued, which has impacted all parts of the market, as our eight offices report:
No time to deliberate: The majority of applicants understand the pace of the market and are quick to make a decision, often making an offer at the viewing, and are ready to compromise for the sake of securing a property. For example, overseas tenants moving to Oxford city centre would traditionally only look at furnished properties but this summer they have been applying for unfurnished as well. Surprisingly, some offices have reported a handful of applicants hedging their bets by making offers on multiple properties with different agents then later withdrawing (with the full understanding that they will lose their holding deposit) once they have secured their preferred property.
A new way of letting: Where demand has so vastly outstripped supply it has become standard to list a property only to remove it hours later due to the overwhelming number of enquiries. Some applicants are offering to take properties unseen or are offering higher rents just to secure the property (Main Photo: a one bedroom apartment where the applicant offered 11% more than the advertised rent). We anticipate demand being more manageable as we approach the autumn months (see Graph 1).
Increased competition for family homes: Quarter 3 is the traditional ‘family market’ time, tailing off towards the end of September once the school year starts. Many tenants in family homes stayed put this year, which reduced supply, meaning many larger properties were let on the first or second viewing (for example, a five bedroom house in Bicester at £2,500pcm1). Furthermore, the increase in hybrid working means professional couples are now competing with small families for two and three bedroom properties as it provides them with the space to comfortably work from home.
More tenants buying: Compared to previous years, more tenants have been keen to renew for a longer term. However, we still received a number of requests for short term renewals (or break clauses) where tenants are looking to buy. Similarly, where tenants are terminating their tenancy early (surrendering) it’s mostly because they are buying – especially in areas where there has been a lot of new build activity. We anticipate this starting to slow in light of the latest rises in interest rates.
More tenants coming and going from overseas: Some surrenders have also been due to tenants relocating, but this has not dampened demand. Across the county there has been a notable increase in applicants moving to Oxfordshire – for example, a 5 bedroom house in Witney at £2,500pcm which let to a family from overseas (photo above). Some plan to buy in the longer term, but are renting in the area first to ‘try before they buy’. Unfortunately, delays in issuing visas (required for Right to Rent legislation) has meant a number of overseas applicants have been forced to make last-minute searches.
More landlords going overseas: New business has come in the form of all types of landlord, from investors to those who have inherited a property or are switching agent. Most offices have also reported an increase of landlords relocating overseas or – for the first time in a few years – going travelling and letting out their property on our Home-Owner Service while they are away.
Failed sales offer welcome supply: Some landlords are still selling if they are able to achieve the high price they are looking for, but the market seems to be slowing. We have successfully let properties which have failed to sell this quarter (see Table 1).
The last three in this list re-let within hours of being relisted. If your property has not sold and you are considering letting instead, contact us for advice.
The big question: Unsurprisingly, the cost of heating a property is on applicants’ minds, with more questions about running costs, asking what the current tenants pay or wanting to see the full EPC. This would also explain the rise in popularity of rents with bills included2. Rooms in shared accommodation fell out of favour in the pandemic but these – along with annexes – have had a resurgence in popularity, offering independence but value for money. In Oxford, location has been key, with bike stores and walking distance to amenities or work being a high priority – possibly due to the increased cost of fuel and the proposed Zero Emission Zone in the city centre.
Upgrades and energy efficiency Where appropriate, we are advising landlords to work on improving the energy efficiency of their rental property now. This will not only keep them ahead of likely regulatory changes (Minimum Energy Efficiency Standards), but keeps their property attractive to tenants. Our advice has always been to maintain the condition of the property: the best property will attract the best tenant at the best rent. Landlords have been more open to upgrades, perhaps realising that the outlay can currently be subsidised by higher rents. For example, a four bedroom house in Headington had a kitchen upgrade by our Bricks & Mortar team and achieved a 15.6% rent increase, and a two bedroom apartment in Summertown had a full upgrade by Bricks & Mortar resulting in a 20% rent increase.
Achieving market rents: It’s a fundamental economic principle that when demand exceeds supply, price increases. This has led to strong rents being achieved on new lets over the summer and appropriate increases being negotiated on renewals. Although the latter are often contested by the tenant, a quick search highlights the current market rate for their property. Interestingly, some landlords have also contested proposed rent increases at renewal, but our advice is to keep the property in line with market value. Rents may begin to stabilise over the autumn and winter and, again, this will be determined by market forces. Despite a challenging few years for the buy-to-let market, with tax and legislative changes, investment in BTL has continued to outperform most major asset classes. Oxfordshire rental properties have long provided good returns and capital growth and we continue to advise landlords and investors on a case-by-case basis.
1 All individual rents in this report are pcm and marketing rents
2 “Bills included becomes most searched for term and renters double search areas”, https://bit.ly/3e2D3fA
Published October 2022
For more information and an up to date view on the Oxfordshire letting market please email firstname.lastname@example.org.