The reluctant landlord, a phenomenon that emerged during the recession as UK homeowners were forced to let their property rather than sell it has returned to the rental market, according to the Association of Residential Letting Agents (ARLA).
Its third quarter report shows that there has been a 34% rise in the number of member offices reporting an increase in the number of rental properties coming onto market because they can’t be sold. This is an increase from 19% in the second quarter of the year.
There was variation across the UK in the number of agents reporting this trend, with 58% of agents in the North East of England reporting an increase in reluctant landlords, compared to 15% in central London.
The number of reluctant landlords peaked during the recession when at the beginning of 2009, some 94% of agents surveyed reported an increase of property coming onto the rental market because it could not be sold.
‘The rise of the reluctant landlord seems to reflect wider market uncertainty and instability. There is a dearth in available property either to rent or buy, yet people are holding back from selling, perhaps strategically, to secure the best price; or more likely because they simply can’t find a suitable buyer,’ said Ian Potter, operations manager at ARLA.
‘While we welcome new landlords to the market, this trend is not without risks. Letting a property can be full of potential hazards, especially for inexperienced landlords from material issues, such as a tenant mistreating a property, to financial problems, such as landlord inability to meet mortgage payments,’ he added.
He urges any property owner finding themselves in the situation to use a qualified, licensed agent who can help guide both landlord and tenant through the process, to ensure neither party is left out of pocket.
The report also shows that compared with three months ago, average weighted rental returns for houses are up from 4.8% to 5% and those for flats are up from 5% to 5.1% but both these changes merely reverse the changes seen three months ago.
On balance ARLA members report increased achievable rent levels over the last six months on all types of rented property and the average proportion of respondents across all property types now saying they think achievable rent levels have increased over the last six months has risen for the fifth quarter in succession, this time from 43% to 55%.
The overall average capital asset value of rented houses has fallen by 2.1% over the last three months as a result of falls of 7.7% for those managing properties in Prime Central London and 3.8% for those in the rest of the South East. For those in the rest of the UK, however, they rose by 9.0%.
During the last three months there has been a further strengthening of demand in the rented residential property sector with the overall proportion of respondents saying that there are more tenants than properties available for them rising for the fifth quarter in succession, this time from 70% to another all time high of 73% and this change is reflected across the country.
Compared with three months ago, the average void period has again fallen, this time from 3.2 weeks (22 days) to 2.9 weeks (20 days), the lowest it has been since this question was first asked eight years ago and the average number of new tenancies signed up in the preceding three months rose sharply from 32 to 38 in line with seasonal trends.
The average proportion of ARLA members’ offices’ portfolios which are made up of investment property is virtually unchanged compared with three months ago at 54.1% but the average number of purely investment properties which are managed by ARLA members’ offices has risen from 120 to 131 properties over the same period, more than reversing the change seen in the second quarter of the year.
On average, ARLA members say that tenants remain in the same property for a period of 17.8 months, a figure that is down marginally from 17.9 months in the second quarter of the year.