Should I stay or should I go now? The question immortalised by Joe Strummer of The Clash in the 1980’s is a question on many Oxford landlords’ lips. Or more specifically, should I sell my properties, or should I keep them?
It is unquestionably that Government policy has been hostile to landlords over the last 5 years. The removal of tax relief for mortgage interest payments, the ban on fees charged to tenants, the planned repeal of Section 21 notices and most recently the virtual elimination of eviction of tenants with persistent rent arrears have all hit landlords hard. And, now we hear of plans to increase capital gains tax is widely reported.
This fiscal bashing meted out to UK landlords was already causing many to wonder whether their participation in the private rented sector (PRS) is worthwhile, and now Oxford City Council plans to further increase costs for Oxford’s landlords by introducing mandatory licencing for all rental homes.
Should Oxford landlords stay or should they go now?
The fundamentals of the Oxford property market remain positive for current landlords. Stubbornly high property prices mean it can be a more marginal decision for new landlords.
Property dedicated to students – houses in multiple occupation where groups of students live together is feeling the effects of c2000 new rooms brought online by the universities, colleges, and specialist providers. But, lockdown has shown to students the benefits of living off-campus where they can live independently, and we are seeing no material reduction in demand for student homes for the 2021/22 academic year.
Central Oxford apartments have felt the effect of reduced numbers of foreign national students, and it has taken a while to re-focus to alternative domestic demand. Whilst rents in central Oxford have not yet fully recovered, decent rental yields continue to be available for the best-presented properties which continue to let reliably.
Lockdown has caused rising unemployment and under-employment particularly in the hospitality and retail sectors. Tenants are waiting until the last minute before they commit to new tenancies with many new tenancies being with 1 month of the date of move-in (compared to 6 to 8 weeks in 2019). Rent arrears are more widespread than the long-term trend, but to date, Oxford has performed well compared to most UK cities.
The most encouraging news, however, comes from Rightmove, which positions Oxford as the third-placed UK city for an increase in rental searches over the last 12 months up by 64% compared to 2019 with just Cambridge and Cirencester showing a greater increase (76% and 75% respectively). This evidence supports my view that Oxford’s economy is showing strong resilience and continues to be a great place to live, work and study.
Economists are split – some point to future inflation and others to stagnation. Property and rental income offer security in uncertain times.
Historically rental income and property values rise in response to inflation protecting income and invested capital. At best, stock markets are expected to be volatile and unpredictable, at worst they are predicted to stagnate in the face of huge sovereign debt worldwide. If, inflation does not take hold, interest rates on savings seem certain to stagnate at record low levels and stock markets will enter bear territory. Both scenarios are bad news for savings and alternative investments.
So, ‘Should Oxford’s landlords stay or should they go now?’
Unequivocally, THEY SHOULD STAY. Landlords’ property assets will see them through the uncertainty of the next 5 years, providing effective investment returns whether inflation or stagnation take hold.