A summer of short supply and increasing rents
The unusual trends of the last 18 months has meant that quarter 3 (July, August and September) has not felt like a ‘typical’ summer in Oxfordshire’s letting market. Supply has continued to be an issue across all eight of our offices – and indeed the market as a whole. This has resulted in many properties letting off-market, on the first viewing, or at a higher rent than listed as applicants are eager to secure their next home.
A recent Zoopla report stated that rental demand is up 19% year-on-year while the total stock of rental property is down 13%1and this has very much felt the case in Oxfordshire. The end of the stamp duty holiday saw continued demand from sellers moving into rental property in order to push their sale through, and a return to the office (even part-time) has also influenced applicants who want space to work from home but also to be close to work. For example, a 1 bedroom apartment in a converted development listed at £9002 which let quickly due to its proximity to the Oxford Science Park (main photo). We have also seen an increase in relocation agents searching on behalf of those who had been working from home (abroad) for a UK company, who are now required to be in the UK office at least some of the time.
The ‘search for space’ is now just a bonus
Where there is so little supply of properties, applicants have become more flexible with gardens and a spare room to work from home becoming a ‘nice to have’ rather than a deal-breaker. As lockdown restrictions eased, demand for centrally located apartments has increased and, as long as they are priced correctly, apartments are letting well. For example, a 1 bedroom duplex apartment in Jericho was listed at £1,475 and had three parties desperate to secure it, leading to it letting at over asking rent.
This time last year we reported that 1 bedroom apartments were popular with single tenants, including those moving out of shared accommodation to have their own space in the height of the pandemic. This year the demand for Houses in Multiple Occupation (HMO) has soared with applicants even calling up to ask– optimistically – if ‘let’ properties have fallen through!
Very active applicants
In Quarter 3 most properties were flooded with enquiries within seconds of ‘going live’. In many cases the property had to be taken off the market within hours. In Abingdon a 2 bedroom apartment in a retirement complex has historically been harder to let due to the requirement for the tenant to be over the age of 65. This year the letting team received more than 40 enquiries from people under 65 who must have received an alert about a 2 bedroom property and immediately acted on it before reading the first line of the description. Further north in Bicester we had two families vying for a smartly presented 3 bedroom family home (photo above) which then let at over asking rent of £1,395 – one family even stood outside the property one Sunday to try to meet the landlord in the hopes of persuading them to pick them – not something we condone.
The disparity between supply and demand is supporting overall rental growth (see graph). For example, a well presented 3 bedroom townhouse in Jericho let at a 20% increase on the previous rent and in Abingdon, 2 bedroom properties that were typically letting for around the £1,000pcm mark for a long time are now regularly achieving £1,100pcm. Of course, the price remains dependent on the condition of the property and a good agent will be able to advise you on current market conditions.
Across the county rent increases have been achieved on renewals after a year of little or no increases in 2020. Where tenants have initially challenged a proposed increase, they have gone on to accept them after searching for alternative property and realising that they would get less for their money elsewhere at the moment. The majority of landlords have made reasonable increases and where they might think of hiking up rents for the sake of it (“make hay while the sun shines”) we would remind them that a good tenant remains key and advise them to be fair and realistic.
Tenants coming and going
Where tenants are renewing they have been happier to commit to a standard 12 months, rather than requesting short 3 month renewals (brought about by last year’s uncertainty and the stamp duty holiday). Those short tenancy extensions have had a further impact on stock levels, with properties that would typically be coming to the market at this time of year now being pushed back.
There have also been fewer tenants requesting an early termination of their tenancy – though where landlords have agreed to these, they have brought welcome stock to the market. The tenant of a 2 bedroom apartment in Marston surrendered their tenancy just four months in and the team in Headington re-let the property immediately and at a 4% rent increase – good for both the tenant and the landlord.
Letting when you can’t sell
Following a record surge in house sales in June (213,370 homes changed hands across the UK), transactions slumped to 82,110 in July according to HMRC3. Landlords who have struggled to sell recently are returning to the letting market and their properties are being snapped up by eager applicants. For example, our Central Oxford team were reinstructed on a 1 bedroom, furnished city centre apartment. The landlord had tried to sell earlier in the year while buyer demand was strong and after four months of no interest we discussed putting the property back on the letting market. A let was agreed one hour later to a single professional and at a 4.35% rent increase on the previous tenancy.
Improve what you have to achieve the best rent
Landlords have been more open to carrying out improvements on their properties, whether that is replacing carpets and curtains or full upgrades. For example, a 2 bedroom apartment in Summertown had a kitchen upgrade by Bricks & Mortar, our building and renovations division, and saw a 13.8% uplift in rent. The Bricks & Mortar team also carried out a full upgrade of a 4 bedroom house in Banbury after a long-term tenant vacated and the property was re-let at a 45% rent increase (photo above).
A new Housing Secretary
The end of the quarter saw Michael Gove appointed as the new Housing Secretary. Known for his predisposition for reform, could this mean more certainty over the much discussed white paper on rental reform (due to be published in the autumn)? We hope for change that ensures the rental market works for both conscientious landlords and tenants and swiftly addresses the current supply problem. The private rented sector makes up half (49.3%)4 of homes in Oxford itself, so it is essential that the service being provided by landlords is recognised.
On the whole, the Oxfordshire lettings market has shown exceptional resilience throughout the pandemic. We have seen some investors expanding their portfolio during this time, as rising house prices, attractive yields, strong tenant demand and historically low mortgage costs provide confidence.
Houses in Multiple Occupation
Our Shared Letting division has seen an increase in the number of landlords who have switched to their services either from other agents or from letting privately. For example, the owner of a 5 bedroom HMO off of Cowley Road had been self-managing it for 10 years. A few tenants moved out at the same time and, following the pandemic, they decided that their time was more precious than managing multiple tenancies. We have carried out inspections, reviewed the HMO licence, and issued new comprehensive tenancy agreements for the fixed term tenancies as well as achieving rent increases to bring them up to market levels. If you need help with your sharer property, contact the team at firstname.lastname@example.org
1 Zoopla Q1 2021 | UK Rental Market Report
2 All individual rents in this report are pcm and marketing rents