Rental properties in Reading have seen robust annual price growth following a surge in demand from relocating families and lifestyle-driven tenants.
According to new research by Savills, over the past three months, rents across the inner commuter zone, where Reading sits, have increased by 3.4%, resulting in annual growth of 9.1% – the highest seen since 2007. This compares to 1% quarterly growth in London and a 2.6% annual drop.
Three and four-bedroom houses performed particularly strongly, experiencing growth of 10.7% and 10.1% on an annual basis with supply unable to keep pace with demand.
Gordon Hood (pictured), Head of Residential Lettings for Savills Reading, comments: "This growth follows a pandemic-fuelled search for more space, which has seen many more tenants entering the local market, as well as existing tenants looking to upgrade to a larger home. Meanwhile stock levels have decreased, and given the market was already undersupplied, this further reduction has intensified continued upward pressure on rents."
While values have risen across the commuter belt, the strongest growth over the last quarter has been in urban areas, as Jessica Tomlinson, Savills Research Analyst, explains: "Across the commuter belt, we’ve begun to see a change in priorities more recently, with people seeking to be closer to transport links and lifestyle amenities in town and city centres, in contrast to the flight to country properties in village and rural locations seen throughout last year. Quarterly rental growth in prime regional towns was 2.8% and 3.2% in cities. This compares to a more subdued 1.7% in villages and rural areas, which reflects a desire among renters for good transport links as people begin their return to London workplaces."
Speaking about the market in Reading, Hood said: "It is undoubtedly a landlord’s market in Reading. Exceptional demand for all property types – from modern town centre apartments to larger family houses in the outer areas of the town – along with the undersupply is resulting in competitive bidding and in some cases, rentals being agreed at above the guide price.
"For example, we recently listed a family home in Caversham at £2,500 per month. Within four days, the house had received five viewings and four offers, three of which were above the guide price. A deal was agreed within less than a week at 16% above the guide price.
"Landlords are often favouring those looking for longer-term tenancies, which can be a particular challenge for 'accidental tenants' – most notably young families moving out from London for schools and additional space – who may be struggling to find the right home to buy or planning a 'try before you buy' approach to the area."
In the short term, Savills expects to see a continuation of high demand for property within Reading and across the commuter belt. But the pattern of rental growth will continue to evolve in response to further relaxation of social distancing, the firm says.
With evidence that London rents have bottomed out and corporate relocation searches are returning to pre-pandemic levels, we expect to see a more sustained return to rental growth in the capital into the second half of this year and through 2022, at the same time tempering demand in the commuter belt towards the end of this year.
As prime London rents continue to bottom out, Savills has restated its forecasts, published May 2021. The firm projects an average five-year rental growth of 14.2% across the prime London markets and 13.1% across the prime commuter belt.
"Travel links are becoming more important again, as many people look towards a return to the office," says Hood. "Being just a half-hour commute from the capital and with a high quality of life on offer, the popularity of Reading for tenants of all types is likely to continue. As a place within which to invest, you only have to look at Reading’s city status bid to appreciate the strength of its offer."