Why are rents in the area going up when property prices are lowering ?

Rents and sales prices are driven by different elements of demand. Sales prices are broadly flat year-on-year and this is due to a mixture of high interest rates which reduces demand and also fairly limited stock levels compared with 2021 and 2022 which supports demand. Rents have been going up due to a shortage of available homes – this has calmed down since January this year.

Where is the biggest demand in the area in terms of property type and location ?

For rentals, we are letting 1-bedroom apartments in RG1 faster than anything.

What proportion of renters are students, workers temporarily based in the town and longer term renters ?

Students are an important part of the market, particular in the summer. They are 10-15% of our tenant group. Otherwise we don’t differentiate between contract workers (say 12 months in Reading) or long-term ‘locals’, we are more interested in whether they are good tenants who can pay the rent and will look after their rental home.

What do you expect the rental market in Reading to do over the coming year ?

The market changed overnight in January and a lot of the heat and stress evaporated. This is healthy for landlords and tenants. We expect the long-term shortage of supply to continue as a Labour Government will not create any policies to attract new landlords to the industry. Fears also remain about the proposed Rent Reform Bill. We expect a more normal rental market albeit with rent increases annually around 5-7% overall. Some rents will decrease where demand was out of control in 2023 and it cannot be repeated in 2024.

There are reports of smaller landlords selling up and more institutional investment, such as Thames Quarter ? Is this right or is your experience different ?

They are two different trends. About 250,000 rental homes have been sold since 2018 in England and Wales – roughly 1% of the total number of houses. Some smaller landlords have been forced to sell by changes to the tax treatment of mortgages (Section 24 legislation) and higher interest rates. However, the vast majority of landlords have not sold; they have stayed in the market and reaped the benefit of higher rents.

Build to Rent is the type of institutional investment you mention. This is where pension funds buy a block of apartments and let them rather than selling them. Amenities are included in the rent to create a premium product, eg. gym, concierge, community events. Build to Rent has the highest rents and is the top of the market. It is not accessible to most tenants due to the pricing.  

RBC is proposing to bring in regulation of more HMOs - is this a good thing ?

We approve of more regulation full stop, but only if it is enforced. There is a raft of very sensible HMO legislation which local authorities can bring in (eg Additional Licensing) with common sense audits of the proposed HMO. Even though it is more paperwork for the landlord, it is a good way to help drive up standards.

It looks increasingly likely that Labour will form the next government. What changes do you expect to see as a result of this ?

Short-term we expect no changes. They will bring in the Rent Reform Bill but apparently that may take up to 18 months. We expect the end of Section 21 (where you can force a tenant to leave at the end of their tenancy) and the end of fixed-term tenancies. In the sales market, there is much spin about revolutionising the planning process to help build 300,000 houses per year. We look forward to this happening although this is a difficult challenge for the Government as it is depending on the private sector to fund and build these homes, yet housebuilders have their own business plans and may not be able to – or want to – move at the pace of these top-down, politically imposed targets.

What can be done to make rents more affordable in the area ?

There are only two ways really. For large new schemes, planners can mandate that some homes are let out at either a Social Rent (50-60% of market rate) or an Affordable Rent (80% of market rent). This is easier said than done and developers fight hard to minimise the proportion of social or affordable units. The second way is to generally increase the supply of rental property. However, since George Osbourne introduced the Section 24 mortgage changes the Government has made it less attractive to be a landlord. Hence there are fewer rental homes. This is a difficult circle to square.  

Would you have any other comments on the rental market ?

That’s enough from me. Please call us on 0118 960 1000 if you need help finding a tenant or a buyer.