Almost two years ago, we noticed the first few Let to Rent transactions here in Oxford. Since that time some interesting trends have emerged and we can see real patterns that are informing the development of the property market in key parts of the UK.
Initially the first few we were involved with tended to be as a reaction to the stagnant and falling property market, especially where property was of high value and the falls were significant sums.
Frustrated owners decided to let their property and rent where they were locating to. Some commentators called this group “reluctant landlords”; however, this generalisation did not entirely reflect what was occurring. Some of those who were letting their property realised that there were some benefits; they retained capital in bricks and mortar (and in Oxford that was probably a fairly safe place to have it) and did not have to pay the high cost of selling their property and buying another.
We had a client who was relocating to a smaller property outside Oxford, but wanted something that was still probably a post 1m value. Buying and selling would have cost over a year’s rent where they wanted to be so they decided to Let to Rent as a conscious decision. By the end of year one, they had noticed that the property they owned had increased in value by significantly more than the rent they were paying. They also had an income from the property that they were letting, that exceeded the rent they were paying by several thousand per calendar month. They decided to Let to Rent for another couple of years.
There are other distinct groups who are now following this model: doctors, who start their career in Oxford, used to sell their flat when they moved on, but many are now letting it and either renting where they have taken up a new position, or buying another one. People who have property in key parts of London and who are relocating to Oxford used to sell and buy, but now are much more inclined to Let to Rent. By the same driver, some those with property in “Prime Central North Oxford” have realised that selling may be a mistake as values have risen significantly over the last year or so, values now, for detached units in the key roads may be as high as 1000 to 1200 per sq. foot. And the supply/demand imbalance that has always skewed values in this part of town is likely to take a significant leap upwards as buyers from the Pacific ring and Middle and Far East (who are now the principal buyers in Prime Central London) start to become active in Oxford.
There has always been a slight delay in trends from London reaching Oxford, but it would hardly constitute a surprise if the property values in Prime Central Oxford were to track the same staggering increases as Prime Central London has seen over the last few years. Whilst rent increases may well be some-what suppressed at the moment, I imagine that as the change from selling and buying to letting and renting gathers momentum, there will be a re-adjustment of rental values that will be referenced to rents achieved for similar property in Prime Central London.