£6m drop in BTL tenant arrears
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Photo Credit: dennoir via Compfight cc

 

The stability of the rental market appears to be improving as, although rents themselves are now rising more slowly, the total amount owed in arrears by tenants has dropped by £6 million in the latest


figures.

 

In the May 2013 LSL Property Services Buy-to-Let Index, the proportion of all rent in arrears fell to 8.2%, while the monthly increase in average rents was just 0.1%.

 

This is less than previous recent months, when average rents typically increased by around 0.3%, but still leaves the annual rent rise at 3.5%.

 

Tenants now have to find an average of £737 per month, up from £712 in May 2012, £696 in 2011 and just £667 in 2010.

 

May 2013 ranks as the third-highest average rent result on record, but the improved state of tenants’ finances meant there were 3% more new tenants than in the previous month, and 5% more than in May 2012.

 

David Newnes, director of LSL Property Services, says: “Looking further ahead, sustaining the increase in new buyers will depend on how many tenants are able to build big enough deposits to get a mortgage.

 

“With wage growth so weak compared to inflation and house price growth, it looks like deposits will become less affordable – which will keep demand for rented accommodation high.”

 

Landlords are also facing challenges due to the suppressed housing market though, which is keeping their capital growth low – meaning the total annual return on a BTL property actually fell in May 2013, to 5.3%.

 

Of the typical annual return of £8,747, less than £1,000 is currently from capital growth, with £7,797 coming from rental income.

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