A quarter of two halves starts the historic year
The Oxfordshire letting market has had a good if unspectacular start to a year which will be defined domestically by the Olympics and Queen’s Jubilee. These have been trends felt across our eight letting and property management offices in Quarter 1 (Q1):
The headline statistics mask a quarter of two halves
In Quarter 1 (January to March), page views on finders.co.uk rose 19% (a), new lets agreed rose 16% (b), and property enquiries rose 34% (c) compared to Q1 last year. These numbers indicate that the Oxfordshire letting market is in good health and that 2012 looks to be shaping up better than 2011. However, the detail is more complex. January and February were busy, with web traffic up 30% in February year-on-year, but then demand dropped noticeably in March. This is odd: normally February is the ‘soft’ month and March is quite productive. Perhaps it was the early summer heat, creating applicant deserts everywhere apart from Bicester where our team had its record month. Like all mavericks, sometimes Bicester plays by its own rules.
More oomph at the top end
Increased corporate relocations and executive education placements are a factor. One of Abingdon’s most glamorous apartments let swiftly at £2095 (d) (Figure 1); our ‘James Bond’ Oxford penthouse re-let with a 6% increase in rent (Figure 2); a Cotswold farmhouse found great new tenants out of season at £3600 (Figure 3); gothic splendour in the beating heart of North Oxford academia let well, marketed at £5500 (Figure 4).
The new car smell
Car companies are canny. They create the ‘new car smell’ to help new cars sell, and more and more we see and advise a similar phenomenon in letting. Applicants across all budgets and geographies want to inhale and feel that the home was (re-)made for them and they will pay accordingly. For example: a clever development in the Banbury countryside let immediately while other village property was shunned (Figure 5); well-designed 1-bedroom apartments close to Magdalen Bridge let at £950 and £1150; a 1930s Headington 3-bedroom home increased 6% in rent after redecoration.
The new life plan: risk-free renting
This is a minor trend but interesting nonetheless. Some recent applicants have 3-5 year life plans in which renting is a key part. For some this is to save to buy a home, but others value renting for its financial predictability: as tenants they know that they will never receive a shock £3000 bill for a new boiler or be forced to repair their roof. They can predict their rent and council tax and budget their lives accordingly. While nothing is 100% safe – you need ongoing income to pay the rent – it is revealing to see the private rental sector desired for its ‘risk-free’ nature relative to buying and homeowning.
Perennially popular: professional bread & butter
‘Bread & butter’ meaning solid 1-, 2- and 3- bedroom homes for those young professionals you keep reading about who are saving for mortgage deposits. Outside Oxford the demand has been for urban not rural homes, for example a Banbury 3-bedroom unfurnished home in good condition let immediately at £895. We have seen migration from the Banbury villages into town to save money on transport. In Bicester rents have drifted up over the past year for 2-bedroom houses from £775 to £825. In Oxford our corporate team has let 27 units in one block over Q1 – practical, central, well-built 1- and 2-bedroom apartments ranging from £1000 to £1700 which reflects OX1’s enduring strength.
Re-letting rents up but with caution on renewals
The increases in web traffic, lets agreed and enquiries have translated to rent increases but not in proportion. Our average increase in re-letting rents (a new tenant coming into a previously let property) was 2.7% at the end of Q1 against 2.2% last year. Part of the increase in web traffic and enquiries could be explained by some March applicants conducting ‘thorough’ searches: one North Oxford gentleman saw 18 properties in one day with various agents – an extreme illustration of the market. Even memory guru Ramon Capayo (e) would struggle to remember the pros and cons of 18 homes.
Renewals (where tenants extend their tenancies) have skewed the market in the past two years. Large numbers of people staying put has removed supply and helped bolster rents against public sector job losses and financial anxiety. In Q1 the volume of renewals fell 1% against last year, which surprises us as it still feels like many people are putting off major life changes and not moving. Average rent increases on renewal were 1.8% in Q1, identical to 2011. This year a segment of landlords are feeling cautious and asking for 0% rent increases to keep the existing tenants happy. How prevalent is this caution? Figure 6 shows the European Commission’s Consumer Confidence Index for the UK (f). The change since 2007 is striking. Hopefully Oxfordshire, with some strong technology clusters, irrepressible universities and a proposed new train line, feels more confident than minus 31 – we do, do you?
The new HMO restrictions started in February
Predictably, the campaigning last year was in vain. Now any property in Oxford with three sharers needs an HMO additional licence, and no new licences will be issued in East Oxford. Landlords split into two camps. The first is – with our help – biting the bullet and becoming HMOs to keep sharers as tenants. The second camp resents the hassle and cost and refuses. One East Oxford landlord opts to keep his beloved original wooden doors rather than fit fire doors, accepting that the £1200 rent with three sharers will drop at least £100 a month with a small family or a couple. Anger and confusion still arise when sharers enquire about 3 bedrooms homes which do not have licences. Don’t shoot the messenger.
We are seeing the most enquiries for family homes in Headington and East Oxford, 2-bedroom apartments in Witney, 2-bedroom houses with gardens in Bicester and the aforementioned well-presented 3-bedroom houses in Banbury.