Rent Arrears Decline in May 2013.

by Mark Johnston

Rent Arrears Decline in May 2013.

Current analysis reveals that the rental sector is still growing, with the number of new tenants up by 3.4 per cent in May on the previous month and by 5.1 per cent year on year.

New research indicates that tenants who are increasingly struggling to pay their bills may eventually lead to rent arrears, a situation which is alarming many UK landlords.

Recent reports have shown that there are many reasons that a tenant may be late paying rent, including:

  • They have lost their job
  • They have moved to a job with a lower wage
  • They have unexpected expenses such as medical bills
  • One of the joint tenants has moved out, e.g. married couple who have separated or divorced.

 

It seem that In some of the poorest households at the moment, around 50 per cent of their monthly income is already used to service debt.

Even though there is an increase in tenants within the rental sector there will inevitably be an increase in rent arrears and therefore an increase in pay day loans due to the spiralling cost of accommodation in the private rented sector.

Nigel Buck from KANA, a firm who provide customer service management, has suggested that a “closer understanding of their tenants” may be one way for landlords to prevent problems developing in terms of potential rent arrears.

However, landlords developing a better relationship with their clients is simply not feasible.

This all said, according to the latest buy to let index from LSL Property Services, the largest network of letting agents, rent arrears fell by 2.1 per cent.

 

These figures equates to 8.2 per cent of all rents that are in arrears across England and Wales, compared to 8.4 per cent of all rents in April.

These means that the total amount of late or unpaid rent decreased to £276 million compared to the £282 million recorded in April this year.

 

David Newnes, director at LSL Property Services, said that “tenants paying down arrears is part of a broader shift where consumers are focusing on deleveraging and shedding their bad debts”.

Some experts believe that the combination of landlords and agents working together and tenants realising that private rented properties are increasingly becoming harder and harder to come maybe some of the reasons behind the drop in arrears.

Along with rent arrears dropping it also seems that recent figures also showed a slight cooling in rent increases.

The average rent in England and Wales has risen by 0.1per cent since April, to £737 per month. This is slower than the average monthly increase of 0.3 per cent over the previous twelve months.

However, the latest increase still leaves rents up 3.5 per cent up on an annual basis and this brings rents in May to the third highest level on record.

In conclusion in the longer run it is still unemployment levels and wage growth which matter the most to the affordability of rent.

 



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