Reading’s ‘Halo Effect’ on Buy-to-Let Investment in 2020
A key destination in the London Commuter Belt and a cornerstone of the UK technology sector, the Thames Valley includes top Buy-to-Let investment markets such as Bracknell and Reading. After attracting broad inwards investment and many of the leading tech companies in the country, it has quickly become one of the top targets in the South-East.
As an affordable alternative to London, Reading has the ‘8th Best Qualified Workforce in the UK’ and is home to global brands including Microsoft, Oracle and PwC. A commercial powerhouse within a thriving regional economy, Reading is forecasting fantastic growth in multiple sectors going forward.
Bracknell is around 20 minutes away from Reading and is recognised as one of the first new towns in the area to receive significant investment towards regeneration. With nearly £770 million spent on the town, Bracknell is already home to global brands such as Honda and Dell and has attracted further attention from technology giants around the world.
From the incredible career opportunities it can provide to the regeneration projects driving property prices, we examine why the success of the Thames Valley is helping drive the impact of the Reading ‘halo effect’, increasing the investment potential of Buy-to-Let property in Reading and also in more affordable markets across the region such as Bracknell.
Economy and Employment
With an estimated population of around 170,000 and an unemployment rate of just 1.5%, Reading is one of the most productive towns in the UK – ranked sixth in the country by Centre for Cities City Outlook 2019. This puts Reading alongside Bracknell as a key contributor to the wider South-East economy. As of 2018, Bracknell Forest had over 5,400 businesses across the landscape, delivering jobs for a population that maintains an 86% employment rate, one of the highest in the UK. With a workforce that enjoys some of the highest wages in the UK outside of the City of London, Bracknell has a number of professionals that work in Reading but live in the more affordable new town.
When the same metrics are applied to the region’s wider digital sector, it’s easy to see why both Bracknell and Reading are such strong foundations for the UK technology sector. Both towns have eight times the UK average of tech businesses and nearly 42,000 professionals employed specifically in digital business, delivering a turnover of around £13.6 billion each year since 2017.
Rental Demand and Yield in Reading
As London prices continue to stagnate, Buy-to-Let investors can take advantage of renters leaving London and where the demand will settle. It stands to reason that the Thames Valley will be one of the key targets due to the direct access it has with the capital alongside the property prices and amenities the region can provide.
The strength of the Reading labour market is a major signpost for investors, demonstrating an appetite for residential accommodation in an area that has constant professional tenant demand. Increasingly we’re seeing professionals choose London or Reading for work but then commuting to more affordable locations that are feeling the impact of the ‘halo effect’. For towns such as Bracknell, which is also seeing an increase in investment, rental demand has never been higher.
Obviously this has a positive impact on growth and yields. The average property prices in Reading have increased by 14% and Bracknell by 30% over the last five years and yet London is still 51% more expensive on average than both, showcasing the value that these Thames Valley locations can provide investors.
Rising demand also means that rents have increased, sitting at an average between 3.7% and 4.6% according to PropertyData. It’s likely this will continue as rental prices in the UK carry on trending upwards.
Typically, productivity is a key indicator for investors. As one of the most productive regions in the UK, the South East will be heavily supported by future improvements to local infrastructure. Both Reading and Bracknell are set to attract continued demand as we enter 2020.
Reading Regeneration & Inwards Investment
Regeneration is driven by inwards investment and typically indicates further growth for investors, especially when regeneration is dedicated to improving infrastructure. The £800 million train station redevelopment in Reading, for example, has acted as a catalyst for the wider region, triggering regeneration projects in the surrounding area while also vastly improving the town’s transport links.
Station Hill, one of these new projects, is a development aiming to create 250,000 sq.ft of office space as well as 530 Build-to-Rent homes. It’s also set to introduce around 2,500 jobs to the local area, further strengthening demand around a key amenity.
Bracknell, on the other hand, is experiencing a full regeneration programme worth £770 million – developing new residential and commercial spaces as well as redesigning the existing infrastructure. The £240 million Lexicon is the first major phase of this regeneration and has helped Bracknell take the spotlight within the South East, attracting unprecedented footfall and kickstarting further regeneration throughout the area.
Property Price Growth in 2020
Reading remains an affordable alternative in a rapidly-growing South-East region with average property prices of £424,000 compared to surrounding prices of £729,105 (London) and £535,000 (Guildford). With excellent performance over the last 20 years (apartments saw a 181% increase in price) only beaten by neighbour Bracknell (which saw 227% price growth), Reading continues to forecast incredible growth and accessibility thanks to the Thames Valley being such a popular destination with commuters.
Looking at more recent growth, Reading apartment prices have increased by 14% since 2014 – outperforming London which saw just 6% but losing out to nearby Bracknell that recorded 30% growth. In 2020 and 2021, Reading is forecast to be the fastest-growing economy according to the EY UK and Regions Economic Forecast. As Reading’s economy improves, the surrounding area will also benefit – the ‘halo effect’ fully on display.
As the London Commuter Belt continues to rise as a key investment destination, towns such as Reading and Bracknell are taking centre stage, driven by renewed inwards investment and soaring property prices. Savvy investors would be wise to consider that the South East is predicted to be the highest-performing region in the next three years.
With infrastructure improvements revitalising already world-class transport links, the Thames Valley is establishing itself as one of the single most important destinations in the Commuter Belt, using the momentum of its position within the UK tech sector.