A strong rental market as housing demand remains high
The story of Oxfordshire’s rental market in quarter 2 (April, May and June) has to be one of an imbalance of supply and demand. Rental demand is the highest it has been for years (graph below) while supply has struggled to keep up. In fact, it is so strong that some properties are inundated with enquiries almost as soon as they are marketed. For example, a 3-bedroom house in Little Minster (main photo) was listed at £2,5001 and within a few hours three enquiries were received from applicants wanting to apply without physically viewing it. This disparity has an impact on applicant decisiveness, rent levels and tenants renewing, as observed by our offices across Oxfordshire.
Why is demand so much higher than usual?
Summer is always a busy time for letting, but there are several factors supporting this year’s increased demand, not least the pandemic delaying many people’s house moves over the last year or so. Last year’s trend of moving out of London for country living has continued, with many people renting to ‘try before they buy’; the pandemic has, unfortunately, led to an increase in relationships breaking down and one party moving out of the family home and into a rental property; and in areas with a lot of new build development, some people are moving into the rental market short term, having sold their property and awaiting completion of the build on their next home.
There are two other trends which are new this year. Firstly, our North Oxford and Bicester offices have noted a marked increase in the number of applicants relocating from Hong Kong to Oxfordshire, possibly a result of the new ‘residency route’ launched in response to the national security law imposed by Chinese government2. Secondly, as the stamp duty holiday deadline approached at the end of Q2, there were reports of an increase in properties being marketed ‘chain free’3 as home owners were moving into rental properties to ensure the sale of their own property completed.
High rental demand means increased applicant competition
As a result of low supply, applicants are broadly being more focused and decisive and every office has multiple examples of properties letting on the first viewing, such as a 4-bedroom family home in East Oxford which was listed at £2,700 and let immediately to a family moving out of London (photo above). Many applicants have done their research, using video tours and photos, looking at floor plans and perhaps visiting the area before they even contact us. For those looking for larger homes, many only have one property they want to view and are quick to make a decision. In North Oxford in particular, there is especially high demand for larger homes, including an 8-bedroom family home on a desirable North Oxford side road which was listed at £13,000 and let on the second viewing.
Where properties are well presented and in a good location, some applicants are eager to take the property unseen rather than risk missing out, and there have also been cases of applicants offering over asking rents just to secure the property. Despite a reduction in choice, applicants are still discerning and want value for money. If a property is well presented, priced correctly and in a good location, it is being snapped up.
The search for space
The last 16 months has seen a change in the most popular search terms for rental property with space being a key requirement to match new lifestyles. Indeed, our East Oxford office has reported a number of applicants requesting that furniture be removed in order to make space for desks, and in Central Oxford there has been an increase in popularity of properties with a second room; what used to be the ‘guest bedroom/study’ has now become ‘the office’.
The share of renters searching for a property with access to its own garden has more than doubled this year compared to the same period last year4, with the most in-demand properties tending to be houses with gardens, and in particular large village homes (as seen in the Little Minster example earlier). Smaller properties with no outside space are performing better than they had last year, but are still less popular than properties with space (inside or outside). We are advising landlords on a case-by-case basis: if the property doesn’t have space, it needs to be in good condition or priced correctly in order to secure a let.
Rents understandably plateaued in 2020, but we are starting to see increases where appropriate. When demand is outstripping supply and the property won’t be available for a couple of months, it may be possible to try for a bold rent (see Table 1), but it must always be realistic and proactively managed. This was the case in our Central Oxford office: we were instructed on a modern city centre property and proposed a rent of £1,550 as demand for 2-bedroom houses with a garden was strong. The perfect applicant was found in just one day.
When it comes to existing tenancies, proposed renewals (and any associated rent increases) are put to the landlord before being offered to the tenant. In some cases landlords are happy to keep their existing tenants and do not want to increase the rent, but where modest increases – in line with comparable properties on the market – are being proposed, many tenants are accepting these after a year of stagnant rents. In a handful of cases, tenants have initially declined a renewal offer due to a proposed rent increase, but have subsequently accepted following a search of alternative available properties.
Renewals further reduce supply
Many tenants are renewing, meaning the typical stream of tenants leaving the sector is not happening at its usual rate, which further adds to the pressure on supply. There is a real split between those who want to commit to longer term for more security, and those who want break clauses or shorter term renewals for flexibility. In many cases, the request for short-term renewals is linked to the tenant purchasing a property. This has been more problematic during the pandemic with the extension of the possession notice period. This means that a short renewal of, say, a month could legally roll on for four months before the landlord could gain possession of the property if the tenant does not vacate. In the majority of cases, this does not happen and if the tenant only wants a month they do tend to move out after that time, but landlords should be aware of the risk around short renewals.
Improving your property
Across Oxfordshire we have started to see some landlords carrying out improvements to their properties in Q2. This ranges from redecoration or updating furniture to upgrading kitchens and bathrooms. For example, the tenants were moving out of a 3-bedroom town house in Abingdon after 10 years. The landlord agreed to a redecoration and new flooring throughout and a new let was agreed at a 17.39% rent increase. In Central Oxford, the landlord of a 2-bedroom apartment agreed to a full redecoration and new furniture from Decorum Interiors, our furnishing division, after their long-term tenant moved out. The property was then let off-market to applicants who viewed the property and took it the same day.
Failed sales successfully letting
Property sales transactions dropped in Q2 as the extended SDLT holiday deadline approached5 and properties are starting return to the letting market after failing to sell. In Witney a 2-bedroom house on a popular development was relisted for letting and a let was agreed one hour later, and in Oxford a 3 bedroom end-of-terrace house was let within 24 hours of being relisted on the letting market. If you have failed to sell, letting instead could facilitate your onward move – even if the long term goal is to sell the property. This is an area where we have vast experience and can help.
1 All individual rents in this report are pcm and marketing rents
3 Rightmove, 2021. Jump in chain-free homes as owners sell up and rent in short-term 2021
4 Zoopla, 2021. UK Rental Market Report. Research and Insight Q1 2021