Supply & Demand – Population
Local government forecasts predict a 29% increase in the population of the Witney area over the next 10 years. Coupled with the exceptionally low rate at which we are building new homes and sales volumes (the number of properties sold) dropped by 19% in 2017 (compared with 2016) and the market fundamentals remain out of balance.
Local Plan
This is long overdue and essential if we are to see an end to speculative development ruining the characteristics of our beautiful region and instead focus on a sustainable and substantial increase in properly supported new homes. In the last three months for which Land Registry figures are available, less than 1% of residential property transactions in West Oxfordshire were new builds. We hope and expect that this is signed off in the Spring.
Residential Homes – Values & Volumes
In the 12 months to September 2016, local property values increased 13%. In the next 12 months, this rate of increase slowed by more than half to 6%. When adjusted for inflation, local property price growth has slowed significantly. Add the further telling sign of 1 price reduction for every 2 new listings and you’ll start to understand the picture that prices are stagnating and buyers are opting to be very cautious with their offers. The market is still moving……..but only if the price is right.
Our view: Volumes will remain low and capital appreciation will remain subdued with prices increasing barely more than inflation. This is echoed in the Autumn Budget in which the OBR downgraded its forecast for property values.
Rents
Rental values have generally pulled back from the peak of summer 2017 when new highs were reached. This has created a slightly unusual effect whereby some tenants can move to a similar property and save money or upgrade to a 3-bed for not much more than they may have been paying for a 2-bed. The supply of 2-bed flats has been particularly high which has prevented rents increasing too strongly. That said, demand has remained healthy and 2018 is the year we expect the ban on upfront fees to tenants to be implemented which may cause some unintended and unexpected consequences.
Our view: rents will remain sensitive to the very localised supply situation but the trend will continue to be upwards. We may see a greater initial churn of properties as the fee ban is implemented as tenants look to make a saving once introduced.