Oxfordshire – insider perspective

With the worst of the pandemic behind us, normal service resumed in the UK property market with international buyers making their presence felt. Nowhere is this more evident than in Oxfordshire, John Gebbels adds, “Oxford continues to have a strong emotional pull on people – a number of overseas people study or work in Oxford at some point in their lives. The county is centrally located, an hour from London, Heathrow and Birmingham, is home to the world’s leading University, part of the golden triangle with Cambridge and London and with a number of high growth industries across life sciences, health, energy, robotics and AI, autonomous vehicles and space-led data applications. These industries continue to attract skilled overseas professionals who want to live within the ring-road or the more desirable villages and market towns across the county”.

Oxfordshire continues to have one of the strongest regional economies in the UK which is another influence on the market. Foreign direct investment (FDI) is one of the biggest drivers of success for the area and the East-West Rail Project will re-establish a rail link between Cambridge and Oxford and transform the region’s connectivity. This is one of the most important infrastructure projects in the South East and will be a huge boost for the region’s accessibility.

The Oxford to Cambridge Arc has been widely touted as one of the greatest opportunities for economic growth in the UK and could, with the right infrastructure, deliver much needed new homes. There is also an emerging trend for more strategic planning, such as the Oxfordshire Housing and Growth Deal which has committed to building 100,000 new homes by 2031 to address the housing crisis and support the economic growth. Gurpreet Sawhney, Residential Property Partner, RWK Goodman, “One of the challenges is the green belt particularly around Oxford and the Government’s proposed garden villages in South Oxfordshire, Vale of White Horse and West Oxfordshire are not the silver bullet to increasing supply as they will only deliver around 10,000 new homes. It is clear the region will need more innovative schemes like the partnership between Legal & General and Oxford University to provide discounted homes for university staff and research graduates on university land alongside homes for general sale”.

Oxford is one of the UK’s fastest-growing cities and has one of the world’s leading technology clusters. However with affordability issues similar to those in London it lacks accessible residential space essential for the University to continue to attract research graduates and businesses’ skilled workers. Oxford will remain a highly lucrative investment opportunity for residential landlords, both domestic and international, especially those that have a strategy targeting students or young professionals.

The post-pandemic hybrid working model has benefited the Oxfordshire market enormously. The north western edge of The Chilterns was often seen as the distance limit for a daily commute into London. City professionals now only going into their offices one or two days a week have started to look and settle further afield. Oxfordshire offers an escape from the more traditional commuter locations / suburban villages of the Home Counties with their price premiums. It’s the most accessible county from London that offers vast areas of unspoilt countryside, convenient market towns and truly rural villages with excellent road and rail access. Fast growing access to speedy broadband and improved tech and rail connectivity are also fuelling that flight. You can be in Marylebone from rural Buckinghamshire on a fast train in less than 40 minutes!

Though it’s very much a tale of two halves across the county, John adds “Those well-established historic market towns like Thame, Abingdon, Wantage and Witney still attract a lot of interest and command high prices especially those within the proximity of a direct station into London. Didcot and Bicester are an attractive proposition for buy-to-let (BTL) investors, young families and first-time buyers because of the volume of new builds and rail links, though perhaps less coveted by purchasers looking for larger family homes. Yet the villages around those towns continue to be highly popular”.

Building new homes is an important step towards alleviating affordability constraints, which hamper economic growth by pricing out workers, and ultimately reduce the attractiveness of an area for businesses if they believe they will struggle to recruit. However, even with considerable activity around new builds, the county has suffered from a massive housing shortage for some time. House builders despite their best efforts have not been able to keep up with what is needed due to a myriad of factors which our experts go into in more detail in chapter three.

The year began with the well documented challenges around the availability of stock. The market enjoyed a good start with housing and mortgage activity continuing to defy economic conditions, with average property prices continuing to rise. The mortgage industry was particularly busy. This strong momentum and confidence in house prices led many lenders to relax underwriting criteria and expand the variety of products they had on offer, including increasing the number of products available to customers with small deposits at higher loan-to-value ratios.

Bank funding and future mortgages

With mortgage rates on the rise, though still “relatively cheap” in historic terms, Adrian Moloney, Group Intermediary Director at OSB Group, commented, “We entered 2022 with a strong pipeline of new business and demand remained strong in our buy-to-let and residential sectors. The mortgage industry was particularly busy following on from an exceptional 2021. In the first quarter with the rise in the cost of living, we saw borrowers rush to lock into fixed rate mortgages as swop rates rose in a bid for stability. However, lenders are still keeping rates relatively low as they fight for market share. Those individuals looking to re-mortgage and refinance have still managed to achieve fairly good deals”.

The economic fallout from the war in Ukraine, rising inflation and decline of real incomes has resulted in home buyers having much less money. National insurance contributions in April increased just as inflation started to rise significantly. Consumer confidence plunged to its lowest levels since 2021 when the UK was in the depths of winter lockdown. The Spring also marked the return of more recognisable and predictable conditions in the UK housing market.

Adrian adds, “It was welcome news for borrowers last year that The Bank of England announced that it was considering simplifying mortgage lending by removing the stress-testing part of affordability assessments. The consultation closed in May, but it is unlikely that there will be any immediate changes to the UK’s mortgage market as lenders will still want to stress test to insure against interest rate rises as they want to lend responsibly. And of course in recent months, we’ve seen the cost of mortgages rise”.

New technologies

Lockdowns forced the mortgage industry to integrate more technology into their business and streamline the process. Traditionally the sector has been slower than others in the financial sector to adopt new technologies; but the pandemic has permanently changed how people looking to buy or re-mortgage a home are seeking lenders. Recent advances in digital technology have resulted in significant improvements in the mortgage application process.

However, as Douglas Miller, Director, Lansdown Financial Services adds, “The adoption of open banking helps to verify income, speed up identity confirmation and customer onboarding, and even helps with credit decisions. Lenders can make faster decisions, while also ensuring the security of customer data; but these applications don’t necessarily understand the relationship, local market or how best to value the property”.

John Gebbels, “In the past, prospective homebuyers would always insist on seeing the property in person. This is understandable as buying a home is incredibly expensive and emotive. The pandemic turned this on its head with strict lockdowns and quarantines people had to resort to digital alternatives. This has long been the case for some overseas investors who were happy for a virtual tour and to buy on agent recommendation. However digital-first millennials who have grown up online and already trust digital channels for their banking and communicating eagerly adopted this approach”.

The rise of fintechs has also caused a shift in the mortgage lending market and are revolutionising traditional approaches to home buying by creating new options that are helping people become homeowners more easily and more quickly. Molo is the UK’s first, fully-digital mortgage lender using the power of technology to make real-time lending decisions via a digital journey to give customers quicker answers and a better overall experience. StepLadder is a London-based start-up that offers a model that uses a rotating savings and credit association (ROSCA) to help its customers raise the deposit they need in order to buy a specific property.

These fintechs have reimagined the mortgage application process, using AI and digitalisation to make it more efficient for all parties. People are embracing fintech solutions in personal banking so using fintech when applying for a mortgage seems a natural next step.

Aaron Taghdiri, Director, Lansdown Financial Services, “Applying for a mortgage has traditionally been a very long and tiresome process. Borrowers must submit huge amounts of information: bank statements, proof of income, evidence of a deposit etc and would require multiple meetings with their financial adviser before the mortgage was even approved. However, the rise of digital channels has streamlined the data gathering process and the mortgage adviser can now focus on educating people on their options and have much more valuable conversations”.

Cryptocurrency for mortgage transactions?

In September 2021 Coadjute, property and mortgage software company, announced plans to launch the UK’s first mortgage cryptocurrency, enabling banks to issue a mortgage stablecoin on their network to improve the movement of mortgage funds. Coadjute aims to connect the people in the UK housing market, enabling every party in a property transaction to share data and track live progress, from beginning to end. By using blockchain technology to verify every party involved, encrypt and timestamp all the data in transit; the platform claims to provide live information from other systems with certainty, accuracy and security.

Gurpreet Sawhney, “There is no doubt that cryptocurrency mortgages are coming, the question is when? In the UK, no major mortgage lender has yet announced that they will accept cryptocurrency for mortgage payments. There are still only a few lenders such as Natwest, Nationwide and Barclays that will accept deposits from the sale of cryptocurrency, but not service the debt. So we don’t see mortgage lenders accepting it any time soon”.

Residential property solicitors are also understandably nervous. While the future looks promising for cryptocurrency, until the regulators provide more guidance law firms won’t have the know-how to check source of wealth and funds on cryptocurrency. There is currently very limited appetite for sellers to accept cryptocurrencies. If you want to use your crypto investments towards a house purchase, this will generally involve the conversion into government-issued currency such as sterling. The antipathy towards cryptocurrency stems partly from its much-publicised association with criminality and money laundering.

The challenge is to find residential property lawyers who are prepared to accept the cryptocurrency proceeds into their client account. There are not many. Gurpreet adds, “Money laundering regulations require residential property solicitors to take steps to identify who their client is and verify that any funds they receive are not from the proceeds of crime. This means that the provenance of the assets must be understood, including the way they have been traded and with whom”.

Rise of multi-generational living

Multi-generational living is nothing new. Country estates have long had dower houses and other properties within their grounds for extended family to live in. In the Victorian and Edwardian eras, it was common for multi-generations to live under one roof. Always popular with our Continental neighbours in the UK this went into sharp decline with the concept of the nuclear family. However, the pandemic and forced separation from our extended family during lockdowns made many rethink the logic of nuclear family living.

The benefits of multi-generational living are obvious: shared financial responsibility, childcare costs can go down, collective contribution to household bills, closer family bonds, greater sharing of inter-generational knowledge and lower or no elderly-care costs. Combining purchasing budgets can allow for greater scope when looking for a property. Buying a property with a parent or adult child can, if proper advice is taken at the time, also reduce inheritance tax (IHT) liabilities. However as Ed Vidnes, Private Client Partner, RWK Goodman comments, “Certainly with the recent pandemic in mind, coupled with an ageing population we are often consulted by clients about the impact of inheritance tax and/or care needs and care fees on their estates. At the same time with children struggling to get on the property ladder, clients are more open minded as to how they meet these various challenges. Multi-generational living can of course address many of these concerns, but only if proper advice is taken by all parties at the time, so as they don’t fall foul of some nasty tax and care charging permutations that can otherwise trip up the unadvised”.

Jayne Martins, Family Law Partner, RWK Goodman, on ring-fencing purchases, “It is becoming increasingly common for family members, particularly parents to help their children get onto the property ladder usually by providing money for a deposit. We are also seeing far more second marriages or relationships later in life where families have already accrued property and assets and they wish to preserve this for their children and grandchildren and therefore need to ring fence the asset in the event of a divorce or separation. It is helpful for families to really think about how they can protect their assets and who they intend to really benefit from them in the future”.

The UK has an ageing population, by 2050 one in four people will be over 65. As the cost of living in retirement homes soars, multi-generation living could be another method of families coming together to counter the effects of rising house prices, the cost of childcare and lack of affordable elderly social care.

Jo Kent, Residential Property Senior Associate, RWK Goodman, “Our estate agent colleagues have been reporting an increase in multi-generational living. With the shortage of new homes being built, coupled with rising living costs and the increasing cost of providing care for elderly parents it makes sense to combine financial forces and upsize into a property large enough to house three or more generations”.

Upsizing, the new downsizing?

Downsizing had been gathering momentum for years. However, in the post-pandemic world peoples’ priorities have changed as they embrace the working from home / hybrid working lifestyle. As part of the drive to more multi-generational living a contradictory trend has been emerging with people looking to upsize with family members.

People tended to focus a lot more on their families and homes during the 2020 and 2021 lockdowns, becoming more aware of what’s immediately around them. These have propelled people across all generations to really consider what, where and with whom their next home should be.

People have been upsizing so they have more space for family and friends to stay, renovations and DIY projects (a growing trend fuelled by the pandemic), business ventures, personal space, additional room for children and growing families and office space to accommodate hybrid working.

Jo adds, “The pandemic and lockdowns inevitably created a demand for larger homes. Space is a huge prompt for many wanting to upsize and the advantages of upsizing are clear - more storage space, further bedrooms to accommodate a growing family, spare rooms that can be rented out for additional income. All of which can help build future wealth”.