BTL tenant arrears fall to two-year low

The LSL Buy-to-Let Index revealed that the buy-to-let market has begun to show signs of recovery, with tenant arrears falling to £227.3m of rent unpaid compared to the peak of £361m in August 2008. This is the lowest level seen by LSL since it began tracking the figures in 2008.

The average UK rent rose for the second month in a row, albeit by just 0.1% in March to £659 per month. This was 1.5% up on a year ago, but 4% down on the peak reached in August 2008.

With house price increases outpacing the rise in rents, yields dropped slightly to 4.7%, 0.1% down on February.

Landlords’ total annual return also rose for the 13th consecutive month, reaching a high of 13.3% in March, with the average landlord making a total return of £20,580 over the past year.

David Brown, commercial director of LSL Property Services, said: “We’re not just seeing an improving picture for landlords, but for tenants, too. The performance of arrears was the surprise story of the recession and they have exceeded expectations again in the first quarter of 2010.

“The economy is recovering, albeit ponderously. Fewer tenants are losing their jobs or seeing pay-cuts and falling behind with their rent.”

David Whittaker, managing director of Mortgages for Business, added: “Landlords are much more bullish now. The demand for property is there, especially as not enough new build properties are coming through. Demand for rental property will remain high while the supply is low.

“In the last few months, we have seen the softness coming out of the market and we will see real growth. Rental growth should run at 2-3% per annum. The horizon looks better, but quantifying it accurately is difficult.”