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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 budget fails to tackle the shortage of rental stock

Leads per property in April and May 2015 v 2014

The imbalance between supply and demand is the big theme during Quarter 2 of 2015 in the Oxfordshire letting market. It is the dominant theme for housing in Oxfordshire per se, and customer and market trends in April, May and June bear this out.

More demand per rental property

One crude measure of demand is the number of ‘leads’ (email and phone enquiries) per property, and Figure 1 shows that demand in April and May was 50% higher than in the same months last year. The shortest rental supply is in Banbury due to 18 months of a revived sales market. Spring and early Summer are the peak rental demand times and there was insufficient property this year, which explains why our average rent rose 4.3% for the 12 months to the end of June. Last year at the same time the annual rent growth was 1.3%¹. We expect the leads per property to decrease in Quarter 3 – summer holidays lead to quieter letting months.

More sharers looking in Oxford

On the 5 year anniversary of Additional HMO Licensing we see the same problem we warned about in 2010: groups of younger people wanting to live with friends but unable to find a home. Why? Because 3 friends in a rental home is classed as an ‘HMO’ and such licences are limited by law in large parts of Oxford.

Most popular homes in Oxfordshire in Q2 2015

What people want

In the peak season we let properties of all sizes and shapes. See Figure 2 for ‘What let best’ and Figures 3-7 for some case studies. By the end of June the volume of applicants for large family houses had reduced and those left on the market need to be realistic about rents.

Figures 3-7 property letting across Oxfordshire


New build in North Oxfordshire

There are plenty of investment opportunities with yields of 4-5% in Bicester and Banbury – call our offices to find out more. The first phase of Elmsbrook “eco-town” in Bicester launched with EPC Band A ratings and lots of open space which make them attractive to tenants (Figure 8).

The first phase of the Elmsbrook eco-development is open

Pet supply and demand – even bigger imbalance

Even though we are part of the Pets with Lets scheme it is galling when you cannot help good prospective tenants. Our Abingdon office reports that 50% of ‘good’ applicants in Quarter 2 (defined as those we can recommend to our landlords) had pets whereas at best we estimate a maximum of 25% of our rental stock can take pets (Figure 9).

Tenants are finding that it is hard to be a pet owner in

Beating up Buy to Let won’t help

“Rental property is taxed more heavily than owner occupied property. There is a big problem in the property market making it difficult for young people to buy, and pushing up rents. The problem is a lack of supply. This change will not solve that problem.”
Paul Johnson, Institute for Fiscal Studies

The Budget announced a reduction in Buy to Let mortgage interest tax relief to 20% for those in the 40% bracket. This may help the Conservatives park their tanks on Labour lawns but it will do nothing to get the 4,678 – 5,328 new houses built which the county needs². Be careful what you wish for – house builders rely on strong demand to justify opening up their land bank and residential investors are part of this. Another view is that Oxfordshire has never had thousands of Buy to Let new build units anyway. Owner occupiers are the dominant purchasers of new housing schemes in Didcot and Banbury and so perhaps the local problem is not as big as the national problem.

The Budget is good news for accountants – we expect many landlords to enquire about the tax planning advantages of owning properties in a company (good in some situations but not a panacea – take advice) and using up spouses’ tax allowances.

1 Internal Finders Keepers figures on a revolving portfolio
2 Strategic Market Housing Authority report – Oxfordshire 2015-2013