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Under the skin of the letting market

Here we share news and views on both the local letting market in & around Oxfordshire and all planned and recent legislation.

The letting market withstands the sales market’s assault


This Quarterly Letting Market Report cannot avoid discussing the sales market. The resurgence of 2007-esque buyer demand is the dominant story of Quarter 1. Fortunately, the robust nature of Oxfordshire’s rental demand enables the letting market to withstand the (over?)heated sales activity. Here are the trends which matter as sensed by our 8 offices:

The ‘End of Reluctance’ arrives as more landlords sell…

In 2010 we saw a spike of landlords selling their rental properties to avoid the CGT changes. The 13/14 tax year has seen a similar spike with 17% more landlords selling than in 12/13[1]. The good news is that 2014 heralds the ‘End of Reluctance’ as many of these selling landlords fell into letting in the 2008/9 sales market doldrums. Many of the other landlords who fell into letting have been converted from ‘reluctant’ to ‘happy’ and they have stayed. In Quarter 1 we have also seen some potential landlords choose to sell not rent – if the sales market is hot then an (often CGT liable) chunk of capital can feel more seductive than a steady rental income stream and long-term capital appreciation. Both trends reduce the supply of rental stock which is in the interest of landlords who retain their rental properties but not those looking for a home

 .…and more first time buyers reduce the pool of good applicants

Particularly outside Oxford, we have noticed that some of the best applicants are choosing to buy and not rent. It is not significant enough to cause concern but is a trend to watch. Also, 3.8% of our tenants left mid-tenancy in the tax year 13/14 while the figure was 2.9%[2] the year before[3]. Most became homeowners. This is driven by confidence and fear: confidence in your ability to repay the mortgage and the fear that you had better buy now. Fortunately, we have been re-letting the properties swiftly, for example a great 4-bedroom family home in Headington re-let at £16504 this quarter[4].


A strong local economy still generates good tenant demand

In crude terms, we have seen a slight reduction in the supply of rental stock and in applicants. The net effect is that rents are increasing at the same rate because the sources of applicant demand are so diversified in Oxfordshire. 1- and 2- bedroom homes continued to let very well in Quarter 1 and even some bigger family houses went quickly. Table 1 lists the properties in greatest demand in our offices. Rents across our revolving portfolio increased 1.7% in the 12 months to March 2014.



Some pleasing deals include helping to let a hidden gem in Park Town, Oxford with minimum expenditure while the owner plans redevelopment (Photo 1); letting the first property on the Buttercross development in Witney within 24 hours (Photo 2); advising a landlord on how to upgrade their 4-bedroom family home in North Banbury and then letting it quickly on a 3 year tenancy to a corporate tenant at £1250; finding the perfect tenants for a 3-bedroom lodge in Steeple Aston, one of our favourite villages (Photo 3).



The automotive industry purrs / motors /drives onwards

The health of the global car market matters to landlords in Oxfordshire. The start of the year seems to be a time for job changes and we have let a wide range of good homes to managers and executives from different parts of the engineering ecosystem in Quarter 1, from a lovely family home in Abingdon to a dramatic converted apartment in West Oxfordshire (Photo 4).


Even before the budget, investors were circling…

Conditions for investors have not changed greatly in the past 24 months but the perception that ‘other investors are buying’ has increased the volume of buy-to-let activity, as has the view that interest rates will start to rise in the medium-term. A typical story is a landlord who walked into our Central Oxford office to gain advice on whether to buy a very solid 2+ bedroom house in OX1. We gave a bullish valuation of £1450 as we had some good applicants up our sleeve and let it on the second viewing at the asking rent (Photo 5).


…but rising sales prices will deter some investors as yields fall…

If the sales price rises relatively more than rent, the yield drops. While Oxfordshire has never attracted investors after the highest yields (they seek capital growth more), some properties risk falling behind. The Buttercross properties in Witney are a case in point. The first tranche sold for just under £250,000 (Photo 2) yet now the second tranche starts at £275,000. A 10% increase in sales price thus affecting the yield

.…and post-pensions bombshell, wilful “rent over quoting” needs tackling

Ignoring the melodrama that “all pensioners will buy investment properties”, it is a problem that the person advising on your rental income can deliberately over quote to bamboozle you and there is no redress. At least IFAs are bound by the Financial Conduct Authority code. Over quoting is prevalent when supply reduces. For example, in March one agent was marketing a 4 bedroom home in Bicester for £1650 (our valuation: £1250) and a 1 bedroom home in a nearby village for £1450 (our valuation: £950). If you are buying a rental property for your retirement then do your homework or face a nasty shock – if the rent quote is 50% more than other agents then make a sharp exit.

The words “ingress”, “water” and “wind” become all too familiar

Any good property manager knows that water is the enemy. Like Jason Bourne or Lionel Messi, water loves exploiting weaknesses. Although Oxfordshire got off fairly lightly from the floods – in relative terms – January and February saw many battered fences, broken sheds, damaged roofs and leaks of all descriptions (Photo 6). Leaks are pernicious, whether internal or external, and good determined property management is needed to resolve the cause.


Satisfaction at last

For years it had been tough to meet one landlord’s expectations. When he moved back into his property we bust a gut to do a great job but still anticipated complaints. Instead we received a satisfying request, “The house is so spotless canI use your cleaners going forward?” And relax…

 Election Watch: Voting on Housing Policies

Politicians will try to turn the Private Rental Sector and so-called ‘Generation Rent’ into a battleground during the May 2015 General Election. Housing is high profile; the PRS has grown greatly in the last 5 years and landlords and letting agents are a soft target. The first shot has been fired by a campaign group called ‘Generation Rent’ whose research claims that “35% of floating voters who rent could cast their votes on the basis of the parties’ housing manifestos.[5]” The operative word is ‘could’ and it will be interesting to see if housing policies can sway voting intentions relative to the hitherto more divisive issues such as the economy, tuition fees and the NHS.


[1] FK internal data

[2] Ibid

[3] Landlords do not have to accept a ‘surrendered’ tenancy but we try to negotiate a solution between landlord and tenant. The tenant is liable for the rent until the property is re-let and the new tenancy starts.

[4] All rents are marketing rents

[5] The Guardian, 29/3/14