A recent report from a key specialist lender reveals that void periods and rental arrears are both down on average across the UK. As a more optimistic outlook for the market returns, our latest article examines why landlord investments remain secure.
Specialist BTL lender, The Mortgage Works, recently published their latest Landlord Panel reports. One highly-anticipated report included is the Regional Snapshot Report, highlighting landlord confidence levels, profitability, and the problems landlords currently face on a regional basis.
The report found that in Q4, 32% of landlords in the UK faced rental arrears in the last twelve months, and just 24% experienced a void period in the last three months. Both stats are down from Q3 2022, when they were 34% and 28%, respectively. Whilst this data may not show a substantial drop, it can reassure investors that the market is on the right trajectory.
Perhaps unsurprisingly, landlords in Central London recorded the lowest rental arrears in the last twelve months, at just 18%. Just two further regions recorded rental arrears below the UK average, with the South East at 28% and the South West at 26%.
In contrast, landlords in the North East of England and the North West struggled much more with rental arrears, at 49% and 44%, respectively. For the North East, however, it’s worth noting that this is a significant drop from the 63% reporting rental arrears in Q3. Whilst 49% is still much higher than the UK average, it’s positive the region follows the same trend as the rest of the UK.
Property investors in Outer London dealt with the least void periods, at just 17%. This is significantly lower than all other regions, with tenant demand in cities, especially London, clearly back to normal since the pandemic.
The East and West Midlands saw a much higher percentage of void periods in the last three months compared to the UK average, at 31%. This was followed closely by the North West at 30%.
What does this mean for your tenants?
After a challenging 2022, many landlords are understandably concerned about the future of the housing market and the stability of their property investments. The last quarter, in particular, saw a substantial number of mainstream media outlets turn their attention to the mortgage market, as interest rates continued to rise to unexpected levels.
The impact of this media coverage was concerning. Whilst some experts, such as Martin Lewis at Money Saving Expert, highlighted the importance of remortgaging at the time, many news outlets solely focused on the issues without offering viable solutions. This was unhelpful and largely damaging to the sector, which was already struggling.
Many property investors still have reservations over whether tenants can afford their rents, and whether this could leave them in a void period or facing rental arrears. With no update on the abolishment of Section 21 evictions, landlords are much more vigilant when selecting tenants.
However, it’s important to remember that whilst rents are increasing to help landlords factor in the increased cost of their mortgage payments, tenants have also seen a rise in their salaries. According to the Office of National Statistics (ONS), pay increased at an annual pace of 6.7% between October and December 2022. Private sector workers saw a boost of 7.3%, and public workers 4.2%. There is still discussion around pay rises not meeting the rate of inflation, but this should make the rent increase less difficult for tenants to cover.
What’s extremely positive about the latest data from TMW is it shows that amidst the mortgage rate rises and media coverage that Q4 brought, the sector remained stable and positive. Expert predictions remain optimistic, with house price growth stabilising, interest rates settling, and tenant demand remaining strong.
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22nd March 2023