The local residential rental sector has sadly not been immune from the economic effects of the 2020 coronavirus pandemic. Compared with the residential sales market, the rental market has proved itself more susceptible to the impact of repeated lockdowns and the associated economic and social disruption and eviction bans.
What is the current situation?
In common with nearly all other English regions, the number of people looking for rental property in Reading and surrounding areas is down. This is due to a number of different pandemic related factors.
#1 Local companies are not recruiting much due to the economic uncertainly and so there are fewer new arrivals looking for accommodation.
#2 There has also been a reduction in young renters as they return home for economic and emotional support in difficult times.
#3 Fewer international students are studying at local universities and many UK based students are choosing to save money and stay at home whilst their studies have gone predominantly online.
#4 Tenants are reluctant to sign a new 6 -12 month lease due to job uncertainty and unemployment rising.
At the same time as demand is falling; supply is starting to tick higher. The implosion of the hospitality sector has led to properties previously used for short-term holiday rentals being converted to long-term lets.
There is a particular over-supply of flats as home workers are attracted by the extra space, both indoor and out, offered by a house.
This over-supply, coupled with the impact of Covid restrictions on many people’s incomes, is resulting in a downward pressure on rents. Landlords can be slow to react to this trend and many are experiencing longer void periods as they struggle to fill their properties at the previous asking rents. Many existing tenants are choosing to renew their tenancies rather than look for new property and are finding themselves able to negotiate an unchanged rent or slightly lower than before.
What is the outlook for 2021?
Property investors are understandably anxious to know what 2021 holds for the rental sector. Whilst mass vaccination is thankfully on the horizon, it is clearly going to be some time before life returns to pre-Covid normal.
Sophic Property is predicting that rents could fall between 3-5% during 2021 in Reading and the surrounding area’s. This will depend on how quickly firms start to hire and how quickly offices are opened up again.
One positive upside we think is if the UK is able to negotiate new trade deals which will attract companies and jobs to the UK quickly. The UK has always been viewed as an attractive place to live and a safe haven – perhaps even more so now. People arriving into the country for work, will need to rent somewhere relatively quickly so this could soften the rent falls for this year.
But, the fact remains that for now, the over-supply of rental property, and in particular of city centre flats, could continue as remote working becomes the new normal for many previously office-based workers.
These people will be looking for larger homes, often in cheaper suburban or rural areas. There will, in addition, be fewer European workers arriving to take up any slack in housing supply now that freedom of movement for EU nationals has ceased.
There will continue to be little scope for raising rents as, compared with homeowners, those in rented accommodation will remain more likely to face job losses or reductions in income due to any further economic downturn.
One sector, however, that may well see some rental growth in 2021, based on what we see in the market currently, is houses of multiple occupancy or HMO’s. As universities gradually return to face-to-face teaching, the demand for good value single student rooms in HMOs should pick up with a corresponding rise in rents for rooms of 5% growth. Especially if Reading’s nearly 18,000 international students move to Reading later this year.
2021 will continue to be a period of uncertainty for landlords. But having a reputable Property agent who can add huge value in the current market conditions can be a game-changer for keeping your properties occupied, with the best tenants available in the marketplace.
By engaging with Sophic Property, you will gain a partner in property. We currently have a 5.0 rating on Google thanks to our amazing customers – be sure to check us out! Happy 2021.