Higher income tenants now struggling to keep up payments

Property investment landlords in the UK are benefiting from higher rents but they are also facing more tenants falling behind with their payments because of the recession.

And it is the higher income tenants that are now falling behind as well as lower earners, research from property group LSL Property Services shows.

The trend of higher income tenants struggling to keep up has emerged in the last six months, suggesting it is the recession and job losses that are now having an effect on the residential buy to let landlord.

In January tenants in arrears paid 66% of the average rent, but as of June tenants in arrears were paying 76% of the average rent. The total amount of unpaid rent in the UK rose by £1.5 million to just over £245 million in June.

But the research also shows that average rents increased to £649 a month in June. Rental yields hit 5.1%, their highest for five years. While this may be good news for landlords whose tenants pay on time it could also leads to more defaults.

Amounts alos vary across the country. In London average rents are £900 per month while in the North West they are £526 per month. Over the last year, tenants in the South East have seen rents fall by 6.6% while in Wales, landlords have increased rents by 4.9%.

‘Rent arrears are second only to leaving a house lying empty for the financial pain they cause landlords. 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,’ explained David Brown, commercial director of LSL.

He added landlords are quicker to act in the event of tenant arrears, but that ultimately landlords are keen to keep tenants in their homes. So how will landlords in the UK react if this situation continues?

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