UK landlords less confident about the buy to let property market

Many tenants are unable to pay rent due to unemployment, research shows

Landlords in the UK’s buy to let sector are less confident about the property sector with continued difficulties obtaining mortgages still an issue.

The latest private rental sector health check for June 2012 from lettings specialist Upad has revealed that there has been a 9% drop in confidence amongst UK buy to let landlords since April 2012.

Asking 500 UK landlords whether they were more or less confident about the buy to let market, the research highlighted a dip to 63% compared to April’s positive rate of 73%.

The research marks a slight but still evident decline in confidence since April and has been attributed to various factors such as the availability of rental stock outside London, tenant inability to pay rent, LHA benefit cuts and difficulty getting sensible mortgages.

‘The UK private rental sector overall has continued to perform well hence why the majority remain confident but that doesn’t mean that there aren’t areas for concern, the 9% dip in confidence highlights this,’ said James Davis, chief executive officer of Upad.

‘Even though London rents are up to 80% higher than the rest of the UK, the rental market here remains very strong simply due to supply and demand but when you look outside of London we see that the market has slowed. The Consumer Credit Counselling Service for example reported a 55% increase in the number of calls they receive from tenants unable to pay their rent, and around half of these callers claim unemployment as their reason for being unable to pay rent. This issue of affordability tends to be more focused outside the London market,’ he explained.

‘As well as this, Local Housing Authority cuts have made it unaffordable to rent to those on benefits while specialist buy to let mortgage products have declined. Indeed, the International Monetary Fund has downgraded its forecast for UK growth putting it at just 0.2% this year, another reason perhaps for landlords to be a little unsure,’ he added.

Each landlord questioned in Upad’s survey had their own reasons for being less confident in June 2012.

‘I am less confident this month. We have about 10 properties as far north as Cumbria and we are clinging onto our tenants in these areas. Most of these tenants are on housing benefit and we have to wait for payments now more so than ever. Some are struggling and we are not getting the full rent each month. However, by stark contrast we have about six properties in the London area and these have always been easy lets. We seldom have any issues here,’ one landlord explained.

Another said;

‘I registered as less confident because wages are stagnant or reducing, living costs are high, and tenants are negotiating rents down wherever possible. There are also fewer investment mortgage deals in the market than there were in 2007, making it much tougher for landlords to find the right deal’.

In spite of concerns, the majority of respondents in Upad’s survey registered a positive attitude towards the UK buy to let market.

‘Indeed, rising tenant demand coupled with an overall lack of housing stock, caused in part by a shortage of new properties being developed has helped push rental yields higher and therefore improved confidence,’ said Davis.

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