The Private Rental Sector will continue to be driven by investment into the economy and levelling-up as set out by Jeremy Hunt in his 2023 Spring Budget.

Although the Spring budget was very light on anything property related, it was a positive outlook on the economy with inflation expected to fall. Just over a year ago, interest rates were 2% and then went up to 6% by the end of 2022 after the mini-budget, they are now around 4-4.5%. For quite a few years now, when taking out a mortgage you need to be able to prove that you can afford more than the interest you will pay, this would be around 6-7% now, so investor landlords should be able to continue through this banking wobble for a few more years.

The cost of living has already gone up so if inflation falls then the cost of living will also fall and there will be a general election next year (after a max 5-year Tory term) and all political parties will need some ‘good news stories’ in the run-up to the election so it is very likely that the government will try to put some money into people’s pockets to make them feel happy.

It is the private landlords who are nimble and can adjust to the market much easier than large corporate landlords so the conclusion is that the PRS will stay and continue to thrive - after all UK stock is a great global asset and has been for a long time. The UK has a very strong tech sector, which is boosting the need for housing, especially in places like Reading that have large business parks and an abundance of jobs, especially in the ever-growing Tech sector.

Reading is Britain's answer to California’s Silicon Valley, and its tech hub runs along the M4 Corridor, from Reading to Swindon, and is home to many foreign and domestic tech companies. Reading town currently has over 11,000 tech companies, which is seven times the national average and is the fastest-growing tech region in the UK. These companies work in AI and data, e-commerce, cyber, digital, gaming, the Internet of Things (IoT), MedTech, and fintech.

So if you are considering a rental investment in the UK this year, here are the things to look out for and what to take into consideration:

TRY TO DO

READING WHITE KNIGHTS DOS AND DO NOTS OF PROPERTY INVESTING 4

  • See the bigger picture! Leverage your finance options - try not to borrow more than 65% LTV. You can speak to our mortgage advisors at the Mortgage Advice Bureau to find the best finance options currently available to you.
  • Voids kill an investment so make sure you are guided by a regulated and established letting agent. Be guided on the rental price and the best time for marketing the property. Ensure you maintain it, look after your tenants, and keep up to date with all of your landlord obligations.
  • Think of the long term, not the here and now. A long-term strategy is so important when considering a rental investment property. There are lower rental yields in the PRS now, between 2-6% but when you factor in house price growth over a longer period of time, this will increase your ROI to 6-9%. With the Renters Reform Bill on the horizon, with the abolition of the S21 Notice, it is imperative to think long-term and to have a planned exit strategy.
  • Look at the energy rating of the investment property: A is the highest and G is the lowest. You already cannot rent a property at F&G rating and the proposal from 2025 is that you will not be able to newly rent a D or E-rated property. Landlord clients need to spend money on their rental properties and there are some easy wins - windows, boiler, insulation. Another reason to purchase newer properties for B2L.

TRY TO AVOID

READING WHITE KNIGHTS DOS AND DO NOTS OF PROPERTY INVESTING 1

  • Try not to buy a property that needs too much maintenance. New builds or under 10-year-old properties will have lower maintenance costs and possibly still have an NHBC in place. A lot of legislation is on the horizon regarding EPCs and older properties can require lots of work and money in order to be future-proofed.
  • Poor tenant referencing: It is vital to check your tenants properly and keep checking throughout the tenancy (at the renewal stage is appropriate) as circumstances can change. Major referencing agencies report that they see at least 1 forged passport per week per agent and getting rid of bad tenants takes time and money!
  • Regulation changes are astounding in the PRS so do not let a selling agent sell you and your investment property without at least discussing it with a knowledgeable or qualified letting agent. Getting things wrong can be incredibly expensive and there is no excuse for “not knowing” your obligations as a landlord.
  • Landlords, if you are generating a yield from your rental property then don’t consider selling it. Today the costs of selling a property are so much higher than they have been (and can take quite some time) and you will lose about 10% of the property value on exit. Trying to shift from one area to another is a mistake unless you really need the money and have to release equity. Instead, look to refinance and use that to buy in your next location.

For more reasons to invest in Reading take a read HERE and, once you are ready to discuss this further please get in touch.