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UK rents fall as arrears rise

Mortgage Solutions
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Mortgage Solutions
Posted:
Updated:
21/01/2011

The finances of private tenants deteriorated during the Christmas period with nearly 12% of all rent left unpaid or late, new research has shown.

According to a survey by LSL Property Services, rent arrears went up by almost 10% since November 2010, with unpaid rent amounting to £276m across the UK in December.

David Brown, commercial director of LSL Property Services, warned that rent arrears could become worse as unemployment rises.

He said: “Tenants have been under steady pressure in recent months. Arrears have been rising since October as public sector spending cuts start to bite in many areas of the country.

“With unemployment set to increase this year, and rents likely to rise once more in the spring, more tenants will be at risk of falling behind with rent payments.”

The LSL group also reported that the average UK rent dropped by 1.2% to £684 per month in December, the lowest average since July 2010.

Brown said that the drop in rents was a result of the adverse weather conditions that deterred renters from viewing properties.

He added that the reduction in rents was also a strategic move from landlords, who were trying to tempt new tenants during the Christmas period.

“Landlords offering properties during the holiday season often lower the asking rent to avoid a costly void period. If a landlord cuts the rental price by 5% to fill a property immediately, he will save £275 over the year rather than seeing their property vacant for the duration of the month.

“Nevertheless, with the supply of mortgage finance to both first-time buyers and would-be landlords still constrained, we are likely to see rents re-start their upwards march before the spring,” he explained.

The group added that despite the decrease, rents in December were still 3.8% higher than a year ago.

However, it warned that falling house prices were undermining the return that buy-to-let landlords could expect in the short term.

“If property prices continue to decline at the same rate of the last quarter, an investor entering the market now could expect to make a total annual return of £3,259 per rental property – equivalent to £8,211 in rent, and capital losses of £4,953,” said LSL.


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