Five years on and the rental market is in good health
It is hard to believe that it is now five years since the financial turmoil of 2008, so how far have we travelled? We have seen public sector layoffs, tax increases, benefit cuts and reductions in local government spending, yet in 2013 the Oxfordshire economy emerges with unemployment less than half the national average1, a new Local Economic Partnership and a science base which is genuinely world-class. The Private Rental Sector has also evolved since 2008. People are more cautious, tenants stay longer, there are fewer ‘weekend’ cottages let to Londoners, fewer corporate tenancies and more young people renting. Beneath these macro changes our eight offices have observed the following trends in Oxfordshire in the first quarter (Q1) of 2013:
1.Value for money, desire for quality
Customers are more price-aware but happy to pay for quality and this is not the contradiction it may seem. The phrase ‘flight to quality’ is a City cliché but in Q1 it has rung true across different areas and property types. To illustrate, we let two new 2-bedroom apartments at the stunning Old Gaol in Abingdon within a week in March. At £12952, the rents were above our off-plan valuations and tenants love the extra security
for peace of mind (Photo A). A 2-bedroom apartment in Adderbury let for £850 because it has fantastic full length windows and is 1200 sq ft (Photo B). A 3-bedroom cottage in Burford commanded a high rent due to its inherent charm, real fire, roll-top bath and beautiful garden (Photo C). This perfect 4-bedroom family house on Stapleton Road in Headington let to great tenants (Photo D) and we have people desperate to live on Bickerton and Highfield Roads. Real quality is delivering the ultimate value for money.
2.Rents rising just above inflation
Overall, rents are up 3.9% year-on-year3. This is less than some of the statistics flying out of the London rental market which tend to influence the media narrative. Renegotiating increases on tenancy renewals was slightly easier in Q1 than last year as many tenants who have been in situ for a while realise that their homes are ‘under-let’. A blunt but revealing comparison of a fictional ‘average’ 2-bedroom apartment at the end of Q1 would be rents of £700 in Banbury; £795 in Bicester and Witney; £875 in Abingdon; £950 in East Oxford and £1200-1400 in Central and North Oxford.
3. Some investors are stuck in 2006…
We have been inundated since January by enquiries from potential residential investors. While some are focused and well-researched, others are still misled by the (2006) hype that ‘buy-to-let’ = ‘get-rich-quick’. Disappointment arrives when we explain the returns (3-6% gross) and the need for patience (ideal timeline = 5-10 years), even if you have a group of wonderful professionals engineered to do it all for you4. Few people seem to have taken financial advice. Perhaps the very sensible Retail Distribution Review5 is inadvertently deterring people from seeing an IFA as now advice may need to be paid for upfront.
4…while other investors buy half with their head, half with their heart
The headline figure for the UK is that more residential investment is happening (Figure 1) and we are helping a wide range of investors reach their goals. A strong underlying trend is that the so-called ‘investor’ is actually a ‘future homeowner’ buying a home which they will live in upon retiring. So they buy partly using a calculator and partly with emotion. The more emotion, the lower financial return they will accept. A central Woodstock development is a good example where several buyers will let for 10 years before moving in.
5.Temple Cowley is galvanised by a major new employer
It is hard to miss the dramatic new Centrica building and it has helped to redefine Temple Cowley among younger tenants who previously sought to live in St. Clements, Headington or Jericho. Now some prefer to live locally and walk to work at one of the many good employers in the area. The nearby David Lloyd gym helps too. A typical property would be a 1-bedroom apartment with a study recently let for £795 (Photo E).
6.Record rents in burgeoning Bicester
Momentum is building. The large new Sainsbury’s just off Sheep Street is due to open this summer, creating 500 new jobs; the new Bicester Village extension has been signed off and will create 30 new outlets; the Kingsway development is growing; and excitement is building about the improvements to Bicester Town station. The result is stronger demand for living closer to London and Oxford than you can in Banbury. We let a lovely 2-bedroom apartment for £950 just outside Bicester (Photo F) which is new territory for this area. 2-bedroom houses in Langford village are letting for £825-875.
7.The new tuition fees are not hindering student demand
We froze the rents on our student portfolio for the 13/14 academic year in a deliberate move to engage with the first cohort of students who face the new higher tuition fees all the way through. Strong bursts of letting in December and February leave our stock over 95% let for September start dates. Student accommodation in Oxford has become
political and sensitive (Port Meadow, St.Clements car park, etc). So far we see many undergraduates and their parents voting with their feet by choosing good quality rental houses in which the students can live like a ‘family’ with their friends.
8.Thatcher’s positive legacy in the rental world
Putting to one side Margaret Thatcher’s more famous successes and failures, her Government transformed the rental industry by introducing the Housing Act and the Assured Shorthold Tenancy (AST) in 1988. It unblocked a market stymied by the draconian Assured Tenancy which made it very hard for landlords to regain possession of their properties. The AST brought common sense and fluidity to an industry which both depends and thrives on flexibility. Landlords became less nervous about tenants refusing to pay the rent or leave and tenants benefitted from more choice as more landlords chose to let.
9. How will the Private Rental Sector change? Follow the latest at finders.co.uk/news
A Common Select Committee is asking if the PRS is fit for purpose as it expands and what, if any, legislation is needed. We are capturing the public briefings of main stakeholder on our blog at www.finders.co.uk/news. Yes, some of it is quite dry, but if you’re a landlord or tenant it might affect you as issues as broad and dramatic as rent caps, compulsory tenancies and regulation are being discussed. Finders Keepers has made a submission to the Select Committee on how to move the PRS forward and we await the final report which is due in July
Less fun in the sun. Our web traffic from Cyprus jumped 90% in Q1 – time to come home?
Opportunistic. A sales agent new to letting calls to ask for our rent valuations for a scheme they are visiting. Nice try.
Charming. A (male) tenant to our (female) property manager at a Check-In: “You’re a woman, you’ll know about washing machines…”.
1. Job Seekers Allowance claimant levels in Oxfordshire in Jan 2013 were 1.6% of 16-64 year olds while the national average was 3.8%
2. All rents are per calendar month and marketing rents
3. Internal Finders Keepers figures based on a revolving portfolio of renewed and re-let tenancies, 3/12 to 3/13.
4. Have we mentioned that we acquire, renovate, furnish, let and manage property?
5. A new law in 2013 which aims to make IFAs focus more on giving impartial advice and less on selling products for which they receive commission. http://www.fsa.gov.uk/about/what/rdr