Mark Hempshell looks at how landlords can still turn a profit even when investing in higher priced areas
A problem more investors are facing is locating property which will attract good tenants and earn good rents, yet which can still be purchased at an affordable price. Some landlords try to hunt down ‘bargain basement’ property in less desirable areas. But it is still possible to make money from good quality property in premium locations – if you know how.
Oxford is a good case in point. The university city has been named by Lloyd’s Bank as the least affordable UK city in which to buy. Property website Zoopla quote the average property value here as at the time of writing as around £413,000, compared to their calculation of the English average of £276,000.
So in such a market can landlords turn a profit from buy to let, and how is it done?
Start with strong fundamentals. Ideally a location where property is in high demand but supply is restricted. Oxford scores very highly here. Official forecasts say Oxford’s population will keep on growing fast with an extra 10,000 residents requiring accommodation here by 2019 – attracted by the buoyant local economy and wide range of employers. Yet, being surrounded by Green Belt, there is very little space for new housing development on any scale.
A strong student demand also helps increase demand for rental property. Oxford’s universities are five times oversubscribed, yet local ‘gown-v-town’ wrangles make it difficult for the colleges to build any more student accommodation of their own.
Buy in a good location. Well located rental property always lets more easily and, frequently, for a premium. We’re not talking just pretty views here. Good local shops, supermarkets, leisure facilities, access to transport routes and places of employment are what most tenants look for. Oxford has all this in spades, and also benefits from good (and improving) access to London.
Invest in an appealing property. Tenants nowadays, especially good tenants, are selective. A property that looks good, and with all ‘mod cons’, will let more easily and stay occupied for longer – perhaps even 12 months of every year rather than eight or nine months as with a less appealing property. New or newly refurbished properties also have a great deal of tenant appeal, and fewer maintenance costs. It shouldn’t be underestimated what a difference minimal void periods and lower maintenance can have on your bottom line.
One of the advantages of investing in an area where sales prices are higher than average is that rents are (or at least should be) higher than average too. Oxford tends to prove the rule here: The average monthly rent, according to Zoopla, is almost double that in the nearest large settlement. (Oxford £1,906pcm -v- Reading £1,095pcm.)
Of course, sensible investors will look at yields rather than just prices and rents. There is also capital appreciation to consider. A recent report from Savills suggests that average property price growth across the south east, of which Oxford is a part, will be the highest nationally in the period 2014-2018. They suggest prices will rise by 31.9% here – even outperforming London where prices will rise 24.4%.
So what advice can letting professionals offer? Robin Swailes has 25 years experience in the business with letting agent North Oxford Property Services. NOPS are also promoting the Trinity Court apartments off Cowley Road in Oxford. Trinity Court is a development of 58 modern and stylish one and two bedroom apartments specifically created with buy to let in mind, and with prices from £187,500. Swailes says of the Oxford lettings market: “Rents are generally excellent and voids (periods when a property lays empty) are virtually not seen here. NOPS reports a 3% increase in rents this year alone, with a positive outlook.”
On areas and types of property investors might look at Swailes suggests: “Most types of property and areas within Oxford benefit from buoyant demand. However, I would particularly suggest entry level buy to let apartments that are well situated. These offer good value for money for investors and a sensible yield whilst attracting the largest sector of tenants in the one or two bedroom rental market.
“For example, Cowley Road. It has excellent transport links both to the city centre and elsewhere. It also has a good range of local amenities with a shopping centre and retail park within a few minutes walk, and leisure facilities including the OzoneLeisurePark, multiplex cinema, ten pin bowling and a fitness club. It also has an eclectic mix of bars, restaurants, clubs and ethnic shops and a vibrant local music scene – a national newspaper recently named it Britain’s eighth coolest street! The OxfordSciencePark, OxfordBusinessPark and the BMW Mini plant are close by, all of which offer a wide range of employment opportunities. All of these make the area very attractive to tenants.”
Swailes adds: “In my view over the next five years the Oxford property market will benefit from the shortage of property, a great location and the ripple from the London property scene. Put all these facts together and add to that a rising property market and you can see the appeal of Oxford residential property. The market is robust and with little availability of new building in the city prospects for capital growth in the longer term are excellent.”
The agents for Trinity Court Oxford are North Oxford Property Services. More information is available from Debbie Swailes, Tel. 01865 318547. Email: firstname.lastname@example.org