Tenant arrears down 4% in Q1

Ryan Bembridge

June 15, 2016

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Serious tenant arrears fell by 4% in the first quarter of 2016 compared to the one before, research from Your Move and Reeds Rains has found.

The letting agents attributed the fall to an improving jobs market, with an extra 44,000 jobs being created in the first quarter of the year.

Serious rent arrears peaked in Q3 2012 when UK unemployment stood at 7.9%, with 124,800 households owing more than two months’ rent.

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By Q1 2016 that number dropped to 86,200.

Adrian Gill, director of Your Move and Reeds Rains, said: “Thousands of tenants have been able to get their finances back on track and pay down late rent.

“Since then a boom in employment has been responsible for lifting many of the most precarious tenant households out of serious rent arrears and onto a more sustainable course. The direction of travel looks very positive.

“A reduced risk of serious rent arrears will be welcome news for existing landlords, facing so many artificial challenges posed by government meddling.

“But no-one should be complacent – managing a property is never simple.  Some landlords are being held back from buying property by the stamp duty surcharge.

“If this stems the flow of new homes into the rental market, then shortages in some areas could push up rents – hitting affordability.”

Landlords themselves are also less likely to fall behind on their mortgage repayments, with Q1 2016 seeing only 9,300 cases of buy-to-let mortgage arrears of more than three months.

This represents a drop of 9.7% since Q4 2015, when 10,300 landlord mortgages  were in arrears.

Gill added: “The evidence is clear – landlords’ finances are the healthiest they’ve been for nearly a decade. Back in 2009, with a distressed purchase market, many owners didn’t want to sell their properties if they inherited or no longer wished to live in their old home – which led to more accidental, DIY landlords. As a result of this, and with more tenants in financial difficulties, buy-to-let mortgage arrears were far higher.

“Since then the private rented sector has changed. Now, with the rise of deliberate landlords with a professional attitude to their investment, the average property investor is more likely to have a business plan and a more professional approach to letting their property.

“Any new risks for landlords are now as a result of anti-renting policies – well-intentioned but possibly misguided attempts to further improve the private rented sector. Landlords witnessing this storm of regulatory change will need to build their cash reserves and reassess their business models. But they are in a very good position to do so.”