Landlords feel the pinch as tenants struggle

Letting agents have reported there has been a rise in the number of tenants struggling to pay their rent, as household finances become more stretched.

The association of letting agents (ARLA) has found that 41 per cent of it\'s members are reporting an increase in the number of tenants facing difficulties meeting their rental payments to landlords in the six months leading up to March 2012. This figure is up 39% at the end of 2011 and up since 37% last autumn.

Figures also show an increase in the numbers of tenants negotiating lower rents, up from 45 per cent to 51 per cent over the last three months. Letting agent network LSL Property Services have found that the average monthly rent in England and Wales is £705. Three years ago this figure was around £650. Rising unemployment has certainly played a part in tenants seriously reviewing their finances.

LSL said rents are up 2.7 per cent on average, this, however, is below the official CPI rate of inflation of 3.5 per cent and has slipped back substantially from the 4.2 per cent annual increase recorded a year ago.
Haggling on rents by proactive tenants has become more widespread in the North East and the South West and less prevalent in London.
Rents have increased by 4.9 per cent in the capital, the region with the fastest long-term growth and it appears to be immune to the recent rental falls – the average rent was 0.2 per cent higher in March than at the end of 2011.

On an annual basis, rent has only fallen in two locations, dropping by 2.2 per cent in the East Midlands and 0.4 per cent in the North West.

As tenants negotiate lower rents and mortgage lenders continue to increase rates, landlords find themselves in a precarious position. Ian Potter, operations manager at ARLA said: ‘With unemployment predicted to rise and average rents also increasing in some parts of the country, it seems more and more tenants are finding it impossible to make ends meet. It is likely the same is happening for landlords, who may find their mortgage rate is rising. At worst, this double whammy may result in landlords defaulting on mortgages and tenants being forced to move out of the property.’

The recent stamp duty holiday deadline in March saw an increased number of contractors rushing to leave the rental sector and buy their first property. House prices also dropped over this period by 1% resulting in many landlord contractors taking advantage, and either adding to their existing buy to let portfolio, or buying their first investment property.

The buy to let market continues to be an attractive investment proposition for contractors, when compared to low savings rates and current stock market volatility affecting growth of pension funds.

Article by: Ben Goble, Senior Mortgage Consultant at Contractor Mortgages Made Easy

Media Contact: Raman Kaur, Public Relations Manager.

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