Rent arrears fall will encourage investor sentiment

The number of UK residential tenants in serious rent arrears is down 35% year on year. Around 68,000 households remain seriously behind with payments, according to the latest Tenant Arrears Tracker from LSL Property Services.

The number of 68,000 relates to those two months or more behind on their rent payments, with the overall drop coming despite an 11.1% seasonal rise in cases of severe arrears. The number represents 1.4% of all tenancies, down from 2.3% a year ago. Overall tenant arrears, a wider measure, are also down, and stand at the second lowest level on record, at 6.9% of all rent paid being late or currently unpaid, as of February.

The news will encourage private rented sector landlords, believe LSL. David Brown from LSL Property Services commented: “The incentive for investment in the private rented sector is already growing on the back of solid rental yields and gathering capital accumulation – but now lower risk is proving to be the cherry on top for potential investors.”

While professional private landlords are generally funded using longer term debt finance, small time landlords in the UK market are often exposed to the short term mortgage finance market. And a tenant delaying rent payments can sometimes cause them to get into arrears with the mortgage payments they are responsible for. Paul Jardine, a receiver at Templeton LPA, part of the LSL group, said landlord mortgage arrears levels are dropping: “”Caution is still advisable, and landlords must maintain regular communication with tenants. Yet the next 12 months could be a real turning point.”

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