'County Towns' Catching Up

Oxfordshire has a strong housing market, but a closer look reveals a range of sub-markets of differing strength. Oxford has seen the highest price growth, as a result of a limited supply of new homes and a strong local economy.

Price growth around the rest of the county has been mixed. Values in Witney and Didcot have been boosted by regeneration of the town centre and expansion of the nearby science parks respectively. Wantage has lagged behind recently, perhaps due to poorer transport links and a perceived lack of amenities.

Successful new development is contingent on new or upgraded infrastructure. Links to London and local employment centres are key to achieving the highest values. Young professional buyers priced out of Oxford are an important market to target; design and size can be tailored to attract them.

click image below to enlarge

^{Source: Savills Research using Land Registry (January 2015 data)}

Economic centre

Oxford’s economy is diverse, led by IT, high-tech manufacturing and publishing. The city’s hospitals and two universities are also major employers both directly and in related education, science and technology companies. Demand from local buyers is ever present thanks to these factors.

Links with the capital are also good, attracting London commuters seeking more space and a balance between city and country life. These factors all contribute to one of the strongest housing markets in the country.

Affordability pressure

House prices in Oxford are currently 23.8% above the 2007/08 peak, and have increased 12.1% in the past 12 months, according to our indices based on Land Registry data. Outside London few places have seen comparable price growth: these include Cambridge, Brighton and affluent areas of the Home Counties commuter belt.

This price growth has meant affordability is becoming increasingly stretched. The ratio of average house prices to average earnings was 16.1x in 2014, according to the Cities Outlook 2015 report, by Centre for Cities. This is the highest in their analysis of the 64 largest UK cities; for comparison London’s ratio is 15.7x and Cambridge’s 14.8x.

Local businesses report that high house prices cause issues attracting and retaining staff. The best young graduates are often drawn to London, where housing costs are also high relative to graduate salaries. If Oxford is to be an attractive alternative for businesses and employees, it must provide more new affordable housing across a range of tenures.

CLICK IMAGE BELOW TO ENLARGE

^{Source: Centre for Cities, Cities Outlook 2015}

‘County towns’

Many areas of the county outside Oxford are also very desirable places to live, with correspondingly high house prices. Historic towns like Burford and Henley-on-Thames are two of the better known examples, attracting wealth from London and overseas. But values in the larger ‘county towns’ have not all behaved in line with the more ‘prime’ locations.

Younger buyers priced out of Oxford are attracted by the lower prices in these locations. Average values in Banbury are around half those in Oxford, and Witney is around 40% lower. For Oxford workers, transport links back into the city are crucial. This favours Didcot and Bicester, each a short train journey away and with values around 35% lower than Oxford.

Whereas Oxford’s market recovered quickly following the recession, prices in the outlying towns have only started to pick up in the last 18 months. Bicester experienced strong price growth in the past year (14.9%), outperforming even Oxford and Henley. Most other locations saw annual growth in the 9-11% range, broadly in line with the South East average. Wantage has been the weakest performer, but prices there still grew by 8.6% annually; it was the last large town in the county to have prices recover to previous peak levels.

Lack of supply

Against all the demand, new supply in Oxford is severely lacking. Only 70 new homes were built in the city in 2013/14, none of which were affordable. Although the historic centre, flood plain and Green Belt all constrain potential growth, this is a particularly low level of building. Looking ahead, two large edge of city sites are set to deliver homes in the next five years, Barton Park (900 units) and Northern Gateway (up to 500).

In addition to land in general being scarce, other uses also compete for it. The economic expansion of the city depends on new commercial space, so potential residential development sites are also in competition with office and laboratory space. Further sites may be allocated for student housing with the aim of freeing up family homes tenanted by student groups.

Most development in the past five years has leapfrogged the Green Belt to the county towns, particularly to the south of the city. A large urban extension at Didcot – Great Western Park – has delivered over 500 homes as of March 2014. A further 240 per annum are set to be completed there in the next ten years.