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Tenant finances continue to improve

Tenant finances continue to improve

Category: Buy To Let

Updated: 08/03/2016
First Published: 08/03/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Tenant affordability can be an ongoing concern for renters and landlords alike, but luckily, new research from estate agents Your Move and Reeds Rains shows that tenant finances are improving, with those in the rental sector now less likely to suffer from a serious build-up of late rent.

The figures, from the latest Tenant Arrears Tracker, show that the number of those in serious rent arrears (those who owe more than two months' rent) in the final three months of 2015 had fallen by 1.5% compared with the previous quarter, with 82,900 being in this bracket. This means that 1,500 tenants were able to escape serious rent build-ups during the three-month period, which reverses some of the deterioration witnessed earlier in the year.

Not only that, but as a proportion of the market, the serious arrears total represents just 1.6% of tenancies across the private rented sector, compared with a peak of 2.9% of tenants in Q1 2008. The number of tenants evicted also continues to fall, with the figure standing at 26,676 during the final three months of 2015, down 0.4% from the previous quarter, and a welcome drop of 5.3% year-on-year.

Adrian Gill, director of Your Move and Reeds Rains, commented on the findings: "An individual tenant is still extremely unlikely to fall into serious rent arrears. In fact, the proportion of renters getting seriously behind on payments has dropped considerably over the longer term… With fewer people at risk from more serious consequences of struggling to pay the rent, this is great news."

It's good news for landlords, too, with the figures revealing that landlord finances are also the healthiest on record: cases of landlords falling behind on their own financial commitments are notably diminishing, with there being just 5,500 examples of buy-to-let mortgage arrears in the final quarter of 2015, down by 3.5% from the previous three months, and by a significant 54% from the same period a year ago.

The current picture of the buy-to-let sector remains positive, added Adrian, with landlords "providing more homes to let every month, expanding supply for tenants – who avoid any serious problems paying the rent in more than 98% of cases. When late rent does happen, landlords appear to be extremely flexible, and eviction orders are decreasingly necessary. Buy-to-let mortgages are also increasingly reliable for lenders, as landlords are less likely to fall into arrears themselves."

However, there are concerns that this positivity may not last for too long: demand for rental properties continues to rise, but with the looming stamp duty surcharge, landlords could well be deterred from investing in the sector. This "could damage supply of additional homes to let and potentially disrupt the relative balance of the modern buy-to-let industry," concluded Adrian, so the next few months could be crucial to see how the sector will adjust to the new rules.

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