Growing Numbers of UK Residential Tenants Falling into Severe Arrears

The UK buy to let sector has been a stalwart of hope and regeneration over the last 12 months; while the rest of the UK housing market (except London) facing barren demand...

The UK buy to let sector has been a stalwart of hope and regeneration over the last 12 months; while the rest of the UK housing market (except London) facing barren demand, with only the fact that supply is also low along with the low-rate environment holding a second dip price crash at bay in favour of prolonged "bobbling" along the bottom (AKA stagnation).

Now though, a new if not entirely unforeseen problem is arising as more and more renters fall into arrears. The problem is still small, but according to the latest data from one of the biggest players in UK residential lettings the problem is growing.

The Tenants Arrears Tracker compiled by Templeton LPA using data from LSL Property Services (parent of the Reeds Rains agency network and Home Away) index, the number of people 2 months or more in arrears (AKA in severe arrears) grew by 18% in Q4 2011. This took the total to the highest level since Q3 2008 when the recession was gathering steam, but the report also points out that this represents just 2.4% of tenancies, making it a very small problem.

"A growing minority of renters are falling deeper and deeper into payment difficulties and the number of severe arrears cases is rising," said Paul Jardine, director and receiver at Templeton LPA, chartered surveyors specialising in Law of Property Act receivership services for lenders.

The growth is backed up by official data from the Ministry of Justice. The data shows that 25000 landlord possession claims lead to a court eviction order in the third quarter of 2011, 5.4% more than the previous quarter and 11% more than Q3 2010. The number evicted through court orders is now higher than in the third quarter of 2008.

But this is not a new problem. Looking back at this article in the Telegraph, at this time last year a survey by the Association of Residential Lettings Agents (the UK's largest lettings agents association) found that 40% of its members were reporting more tenants falling into arrears, up from 35.9% in the previous quarter.

Of course more people find it difficult to make rental payments during the festive season, Christmas presents are getting more and more expensive, and there is constant pressure on parents to get their kids the best brands. Time will tell if it is an emerging trend set to become a big problem or not.

- Thursday 05 January 2012

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