Why invest in property in Oxfordshire?
The housing market in Oxford and Oxfordshire is often in the news as a microcosm of the UK's 'housing crisis'. The point of this article is not to debate affordability - it is clear that Oxfordshire has a serious shortage of housing - but rather to put the case for why it may suit some people in terms of residential property investment.
Factors creating housing demand
In the decades since we launched, there has been consistent and solid demand for people to live in Oxfordshire, and we divide the factors up as follows:
- Two universities - Consistently ranked in the Top 10 universities in the world Oxford University attracts students, post-grads and staff from a global pool. It creates spin-off companies which in turn create more employment and more demand for housing. Brookes University is an important part of the story too - it has grown considerably and is investing in consistent development in East Oxford.
- Strong economic clusters - from cryogenics to Formula 1, from BMW MINI to the Diamond Light project, Oxfordshire has a range of intense, added value clusters and world-class companies such as Oxford Instruments, Sophos and RM Leaning.
- Between London & Birmingham - Oxford is an hour from the two biggest cities in the UK and a perfect base for commuting. We let properties to couples where one person works in each city.
- Central location - Logistics companies like Oxfordshire as it is on the edge of the highly densely populated South-East but with fast access to the M40/M6 north, M4 west and A34 south.
- Schools - Education is Oxford's most famous industry, and the fee-paying and state schools attract considerable numbers of people from London and abroad. North Oxford alone has eight well-known schools.
- The countryside - Oxfordshire has some of the most pleasant villages in the country. A cold pint at the local, the sound of leather on willow, good primary schools and now even a branch of Soho House - there are good reasons why so many people take root in our countryside.
- Low crime - There are pockets of social deprivation and many people would be surprised at the inequality within a city such as Oxford. That said, crime is low in the vast majority of suburbs and villages.
- It's a nice place! We might be biased but there is an intangible sense of place and community in Oxford and Oxfordshire.
Factors limiting supply
The Strategic Market Housing Authority says the county needs 106,500 new homes by 2031 which approximates to 5000 new homes a year. So why are more new homes not being built:
- Green belt - Much of Oxfordshire is protected land, including a ring around the city of Oxford. This hinders attempts at creating new housing and is likely to be the biggest single point of contention for housing over the next 20+ years.
- Council discord - The various local authorities cannot seem to agree with each on where to build more housing. Crudely Oxford City Council says it has space for 900-1000 new homes at a maximum and it wants the formal plans of its neighbouring council's to include more housing for Oxford's workers. The lawyers have been busier than the house builders.
- Flood plain - If you look at Oxford from above, much of it is flood meadows and it will never be built on. Port Meadow is under water for most of the year. The River Cherwell and Rivers Thames both run through Oxford. Plus the River Evenlode floods too.
- Views and height - The 'dreaming spires' of Oxford means that certain views are protected. Oxford needs to protect its medieval heritage and substantial tourist trade which means that tall buildings will not be easily built in the city.
- Finance - Key projects have been delayed due to economic problems, eg. the new Westgate, the new station, the West End development
The result: consistent rental growth and strong capital growth
The graph shows a steady relationship between the average rent on the revolving Finders Keepers portfolio and inflation in the form of RPI. This illustrates the consistent influences underpinning demand as listed above. The Oxfordshire rental market is inherently different to the London market, for example, which rides the peaks and troughs of the economy and particularly the financial sector.
The sales values are less consistent but overall, greater than the rental growth. The short supply of new property amidst a strong local economy is the main factor here. This trend in median sales values is what motivates our 'capital' investors.
RPI, Rent Values and Sales Values - indexed to 100
Data sources: ONS inflation figures; Finders Keepers internal figures; ONS Average Dwelling sales prices by county.
Yields and income vs. capital appreciation
With strong demand and limited supply, the gross rental yields are not going to be stratospheric and crudely we see yields of 4+% in Oxford and going up to 5+% in the market towns such as Banbury and Bicester.
This triggers a key question for you: are you going to invest for income; for capital appreciation; or for both?
'Income' investors know that they need the income to support their life and they may be happy to sacrifice a bit of long-term appreciation.
'Capital' investors' decide they want to park their capital for the long-term (5 years minimum) because they think their property will increase in value.
It is difficult to get both. You need to make a decision about your priorities, your life and what income you need and when.
Each property is different and a view must be taken on the property and on broad trends.
Where to buy?
We advise our retained clients on where to invest whether it is new-build or second hand property. We understand the micro-rental factors and prices and we will give you advice related to your specific objectives.