15:32 PM, 20th February 2013, About 10 years ago 8
I am often asked why Oxford represents such an attractive option for buy to let property investors.
The answer is, like much treasure, not blatantly obvious, but if you are prepared to dig a little, the clarity of the jewels you may find are particularly alluring.
The city has been home to a transient population since the Middle Ages. The intellectual elite continue to arrive here in droves from all over the world; a stint at Oxford, either for study, research or employment adds value to any CV. During the early years, Oxford was a walled city, nothing much has changed, the new wall is the ring road, and represents an immovable barrier to the physical growth of housing provision, which places extra-ordinary strain on the supply and demand dynamic, resulting in a permanent state of insufficient supply.
For the investor, the implications are far reaching. First and foremost, there is no danger of a void period, across our managed portfolio of over 360 properties, our voids run at less than 2.4 days per year. Next, capital values only move in one direction; during the last housing downturn (89-92) Oxford property values did not dip, and much the same has occurred this time; the shortage of supply has meant that values in key sectors of the city have continued to buck national and even South East trends, and very few postcodes have values that are not now well above the pre-crash highs of summer 2007. Another attractive proposition for the investor is the quality of the tenant; many of the visitors to the city are highly cosmopolitan and bring with them the European, Pan American or Pacific Ring values and expectations in relation to private renting, consequently dilapidations are, on the whole, lower than might be expected in other parts of the UK.
Investors, who look only at the Yield figures, might be put off; there is no doubt that better returns are available in other cities of the UK. At the moment, there are investors buying at anything between 4.5% and 7% gross, and given the high capital outlay, many are put off. The competition for investment property is none-the-less strong because there is so little coming on the market, and always kept keen by the parents of students in their first year at one of the universities who realise that they can make a saving by purchasing a property where the loan can be covered by the rent paid by their child’s friends!
The local authority is taking an increasingly interventionist approach to the PRS in Oxford. The Article 4 directive that has been in force since February 2012 is beginning to have tangible effect, and although this may not be sustainable legislation there is a notional cap on HMOs in the city which is fuelling rent increases and will undoubtedly start to have an impact on values this summer. The Additional Licensing scheme, likewise, has further served to restrict supply of shared accommodation with many long-standing landlords choosing to duck the requirements by reducing occupation to two or a family.
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