Oxford’s historic association with higher education is justly famous, but a key priority for Oxford is not only the city’s ability to attract the best talent to study, but to retain talent over time.

Starting with those who go to university in the city, graduates of Oxford’s two major universities, the University of Oxford and Oxford Brookes University, earned a 37% premium over the average income for a recent UK graduate, according to HESA data.

Of the nearly 13,700 students who graduated from the city’s universities, only 17% per annum remained in the city 15 months after graduation. Of the 83% that left, the overwhelming majority moved to London, with many graduates frequently enjoying higher median incomes in sectors including STEM, law and business.

Losing graduates is not unusual for small- and medium-sized university cities in the UK. Only two cities, London and Manchester – gained more graduates than they lost within two years from graduation, and the latter only by a thin margin. Some of Oxford’s losses are made up for by the city’s ability to attract graduates from elsewhere; close to 4,000 graduates moved to the city within the same 15-month post-graduation window. And those who stay or come to Oxford are often working in highly paid employment in key growth sectors. HESA data suggests that of recent graduates currently working in the city, 52% are in a STEM-related field. These research-intensive sectors are key to economic growth, and also offer healthy salaries, ranging from £26,500–£35,700.

In addition, the city’s universities are successful at attracting overseas students, many of whom will return to their country of origin at the end of their studies. Exact figures aren’t published within the HESA data, but of the 13,700 graduates mentioned above, about 5,200 left the UK within two years of finishing their course.

Oxford loses a net 55% of graduates within just two years post-graduation, leaving the city 15th in the country for retaining talent after graduation, behind Cambridge (14th) but also behind other growing cities that are successfully attracting and retaining graduates, such as Manchester (2nd), Birmingham (3rd) and Glasgow (4th).

What is driving talent away?

So what might be driving talent away from Oxford, beyond the usual churn of graduates? A fundamental issue impacting the retention of the talent pool in Oxford is affordability of the housing market. Despite enjoying higher salaries than average UK graduates, Oxford graduates are priced out of much of the rental market, with limited available housing options.

In order to get a more realistic understanding of the affordability of the rental market to graduates, professionals and young families, the map shows the travel times within 45 minutes by car and by public transport to key employment clusters within Oxfordshire. The map also shows the areas within the county that are affordable to recent graduates.

The conclusions are stark: recent graduates earning £28,000 a year looking to rent a one-bedroom flat, spending 30% of their gross income on monthly housing costs, are priced out of 94% of the rental market in Oxfordshire. Within the city centre, the situation is even worse, with median rents surpassing what is affordable to graduates by up to 118%.

Graduates can only afford the median market rent in one postcode district that is (partially) within Oxfordshire: RG17. However, this area sits at the very outer limit of the travel time area, is only accessible by car, and has virtually no rental stock, with only 24 one-bedroom flats available to rent across the year to Q3 2022. Other areas where the median rent is affordable to graduates are well beyond the travel time area and are indeed outside of Oxfordshire altogether. Even in these four affordable postcode districts as shown on the map, there were only 130 suitable properties available to rent over the same period.

In other words, the lack of affordable and available rental stock simply makes it very difficult for graduates to remain working in Oxfordshire whilst living on their own. Graduates who choose to stay in Oxfordshire are faced with a choice of spending a higher proportion of their gross income on rent or long commutes by car from as far as beyond the county.

The travel time area outlined above assumes the use of a car. For those graduates looking to rely on public transport in order to access the key employment clusters, affordable housing options are even more severely restricted. Within the public transport travel area, no postcode districts are affordable to recent graduates based on median market rents.

Rental stock at Kidlington, which is accessible to the city by public transport within 45 minutes travel time, is typically beyond graduates’ budgets. Key new housing developments at Bicester and Banbury are well beyond the practical range of a graduate commuting without a car. As the public transport area effectively covers one of the most critical economic corridors in the county from Oxford to Abingdon to Harwell, the lack of affordable stock underlines the urgent need for more affordable options for renters and better public transport connections to the city.

For graduates willing to share, two graduates looking for a two-bed flat within reach of key employment clusters across Oxfordshire (and assuming the same median income), the share of the rental market they are priced out of falls to 30%. These figures improve again for three graduates sharing a three-bed flat, and so on.

The situation remains challenging even for those with more established careers. High levels of demand and competition for larger units that can be shared, reduce the housing stock available for families. For example, our analysis suggests that for a young family on 1.6 incomes (accounting for childcare costs and other expenses), the median rent on a two-bed home within the city centre is too expensive. Across Oxfordshire and within 45 minutes of travel time to key employment clusters, 35% of such homes are beyond their means. In other words, well-located homes in the rental market near key employment clusters are unaffordable to young families, forcing them to look further away from the city and county in order to access affordable rental housing.

Affordability of buying

Compounding the difficulties in convincing people to stay in Oxford, things aren’t much better for those households looking to buy. Recent price growth in Oxford has far outstripped growth in local incomes, creating serious issues around affordability for owner-occupiers.

Would-be first-time buyers are increasingly priced out of the market, unable to raise a sufficiently large deposit to buy a home. As of June 2022, the average first-time buyer deposit in the South East was nearly £17,000 higher than their gross annual income. Data isn’t available for Oxford, but given higher prices in the city, the average deposit needed is likely to be even less achievable for those looking to purchase their first home.

This problem is unlikely to be resolved soon. Median wages in Oxford are set to grow by 17% by 2027 according to Oxford Economics projections. Although growth in wages is likely to outpace local house price growth, marking the first time in many years, this would still leave deposits at more than twice annual incomes in Oxford.

Fundamentally, the affordability of the Oxford housing market has significant implications on the city’s ability to retain the best talent. Of the stock that is available, the quality significantly varies, with an absence of high-quality, purpose-built rental schemes. In order to retain talent, the housing stock offered in Oxford needs to be comparable in pricing and quality as to that offered in other cities that successfully attract and retain the best graduate talent.

Key takeaways

• A key priority for Oxford is the ability to retain the graduate talent pool. Oxford retains 17% of graduates each year, leaving the city 15th in the country, behind Cambridge and also behind other growing cities such as Manchester, Birmingham and Glasgow.
  
  
• Recent graduates are priced out of 94% of the rental market within Oxfordshire. Graduates who choose to stay in Oxfordshire are faced with a choice of spending a higher proportion of their income on rent or long commutes by car from as far as beyond the county.

_{Read the articles within Oxford: A global competitor below.}