Rents On The Rise - But So Are Arrears

Market shift as tenants in pricey properties fall behind with payments


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Landlords had good reason to be cheerier in June as rents rose for the first time in three months and the property market continued to stabilise, according to the latest monthly research from the property industry.

Overall, average rents rose to £649, up just a fraction of one per cent compared to the previous month, leaving them 3.4% lower than August 2008 when rents reached their peak. A year ago by contrast, rents were rocketing far ahead of inflation, increasing over 7%. Yields ticked up in June to 5.1%, reaching their highest point in five years.

Compared to May, rents in the capital rose fastest in June, up 1.7% to £900, while those in the North West slid 1.4% to £526 per month. Over the last year, tenants in the South East have been celebrating rents falling by 6.6%, while in Wales, landlords have increased rents by 4.9%.

The news on arrears was more mixed. The total amount of unpaid rent in the UK rose by £1.5m in June to just over £254m. But the total number of tenants who were behind with their rent actually fell, from 557,000 in May to 529,000 in June. Typically tenants in arrears are lower earners living in cheaper rental homes.

However, in the last six months, there has been a shift with those in more expensive rental property now also falling behind with their payments. In January the average tenant in arrears typically paid two thirds (66%) of the average rent. Now a typical tenant in arrears lives in a home costing three quarters (76%) of the average.

A spokesman for LSL Property Services who carried out the research said, "Rent arrears are second only to leaving a house lying empty for the financial pain they cause landlords. Most of the improvement in June was among those only a few days late, but there has also been a small drop in those more than a month behind too.

“Those who suffered first from the recession were those in lower paid jobs, often the most disposable workers when employers look to cut. But the downturn is progressively affecting tenants on higher incomes as they begin to fall behind with their rent.

“Landlords are learning the lessons of the recession, and are quicker to act when their tenants fall behind. Opening up communication quickly with tenants is key. Landlords want to keep people in their homes – they rely on the rental income and would rather tackle arrears quickly and constructively. Using professional management services can really help in this respect.”

July 31, 2009