Tenants' expectations grow as rents increase

Tenants' expectations grow as rents increase

The Oxfordshire lettings market remains buoyant, with consistently strong levels of renter demand and supply of rental properties remaining low. Although anecdotally our eight offices have reported a slight improvement on landlord enquiries across Q2 (April, May and June), the level of homes coming to the market nationally remains stuck 20-40% below pre-pandemic levels1. This imbalance has impacted rents over the last couple of years, and as a result tenants are now expecting more for their money. 

Properties continue to let promptly
The volume of enquiries received when a property is listed remains high, and in many cases block viewings are arranged and a tenant is found from this first batch of viewings. For example, a 1-bedroom apartment in Headington at £1,3002 which let immediately to a single professional, a 2-bedroom house in Didcot at £1,200 which received four applications or a 2-bedroom house in Witney at £1,050 which received three offers following the first block of viewings (photo below).

Demand for town centre properties
Our offices outside of Oxford have also seen a significant increase in the number of applicants coming from overseas to work as carers, likely due to the Government’s support of international recruitment within the adult social care sector3. These applicants have been looking for family homes within walking distance to town centres or with good public transport links. 

Overseas moves bolster supply
In May the pandemic’s alert status was downgraded from the highest level4 and it certainly feels as though things are moving back towards pre-covid behaviours. Across the county we have seen some tenants leaving their tenancies to relocate overseas, and many offices have noticed an increase in the number of landlords enquiring about letting out their homes whilst they temporarily move away for work or travel. 

Mortgage rates impact tenant behaviour
Changes in mortgage rates are likely to have an impact on around 30% of landlords (see Graph 1), but it is also impacting tenants who would typically leave the private rented sector to buy a home. Where these tenants are renewing their tenancy, we have noticed a small increase in the requests for two-year tenancies - this suggests a desire for stability.  

Rents stabilise for some properties
The supply and demand disparity has understandably put pressure on rents, which have increased over the last few years (see Graph 2). During this quarter we have seen some rents continue to rise where properties are in the best condition or in high demand. On the other hand, we have seen certain rents start to stabilise - in particular some family homes seem to have hit their rental ceiling as demand from family applicants in some parts of the county has reduced slightly year-on-year. 

Tenants expect value for money
With properties letting so quickly over the last few years, a reluctance to upgrade them has developed. However, as rents increase tenants are seeking value for money and it’s now essential to carry out improvements in order to achieve the best rents and attract the right calibre of tenant. For example, a 3-bedroomhouse in Yarnton had a tired kitchen and was in need of redecoration. The landlord agreed to the upgrade works between tenancies, and the property re-let at a rent increase of 8.6%. In Bicester, a landlord of a 2-bedroom apartment agreed to a full redecoration including new flooring and the property was re-let at a 31.6% rent increase. 

Bills and energy efficiency
Unsurprisingly, properties listed with bills included in the rent remain popular. Our East Oxford office recently let a very high-spec1-bedroom apartment just outside of Oxford which had bills included (and an EV charging point) for an 11.8% increase in rent (photo below).The energy efficiency of a property has started to become part of the conversation at most viewings, although the EPC rating has not yet been a deal breaker for any lets. MEES regulations should remain a focus for landlords as energy efficiency could become a factor in rental value; a report from Rightmove found that nearly half of renters would pay more for an energy efficient home5

South Oxfordshire developments
Our Abingdon office reported increased activity at new developments, with some sites offering multiple incentives to buyers. This has led to a handful of tenants terminating their tenancy early to buy, and it’s also seen investors bringing new build properties to the rental market. For example, a 3-bedroom house in Didcot at £1,500 which let on the first viewing to a small family (photo below). 

Investors still active
With the easing of property sales prices and soaring rental values, there are a number of opportunities for investors to snap up failed sales. Whilst the headlines may make things look difficult for landlords, the fundamentals supporting the buy-to-let market remain strong– especially in areas with robust demand (there are more people renting privately in Oxford than 10 years ago6). We have seen a number of new investment purchases let quickly this quarter, including the Didcot property above, and a 2-bedroom apartment in Summertown at £1,900 (an increase of 31% against the previously agreed tenancy) (photo below).

Renters (Reform) Bill
This quarter saw the Bill introduced to parliament and although the unknown can often seem scary, we are reassuring our managed landlords that they do not need to panic. At the time of writing, the Bill has not yet had its second reading and with parliamentary recess due in less than a month, it’s unlikely that this will become legislation before 2024.We await detail and will communicate with our clients when we have more definitive information. The aim to establish legislation that reflects the growing number of renters is appropriate, but the government needs to ensure their proposed changes don’t cause more landlords to exit the sector. 

Short stay to HMO
Our Shared Letting division has reported a trend in clients looking at changing the use of their investment property to join the HMO market, which is always popular in Oxford. Our team has been helping with planning applications (for change of use) and advising on upgrade work required to bring them to market standard.

1 Zoopla, Rental Market report June 2023
2 All rents are marketing rents and per calendar month
4 The Guardian, Covid-19 is no longer a global health emergency, says WHO, May 2023
3 Gov.uk, IN International recruitment fund for the adult social care sector, Feb 2023
5 Rightmove Spring Survey, April 2023
6 Oxford Mail, Census shows more people are renting privately in Oxford, January 2023