According to Templeton LPA, a specialist practice of chartered surveyors, the number of tenants in severe arrears of more than two months grew by 1.6% last quarter, which represented a slower rate of increase than the 4.6% quarterly rise seen in Q2 2012.
Although severe arrears cases steadily climbed last quarter, overall tenant arrears fell slightly in August, with 9% of all rent late or unpaid, the first improvement in this measure in three months.
Paul Jardine, director and receiver at Templeton LPA, said: “While the majority of tenants have shown a slight improvement in their ability to cope with the bigger rent cheques, the minority of renters who are months behind with rental payments is still expanding.
“Nevertheless, it’s encouraging news for landlords that the rate of growth is slowing. The labour market has held up well recently, and if it strengthens further, it may well keep a lid on the number of tenants unable to pay the rent in the short-term.”
Despite the steady growth in severe tenant arrears so far this year, there was a slight reduction in the number of tenants who faced eviction through court order on a quarterly basis.
In the second quarter of the year, 25,422 tenants faced eviction notices, a quarterly fall of 6% compared to Q1. However, evictions remain 8% higher on an annual basis.
The number of buy-to-let mortgages over three months in arrears fell by 7% to 22,000 by the end of Q2 2012, compared with a previous quarterly fall of 4%.
On an annual basis, cases of buy-to-let mortgages more than three months in arrears fell by 21%.
David Brown, commercial director of LSL Property Services, added: “Arrears management and prevention is a crucial consideration for any sensible property investment strategy. Landlords need to have a plan in place for identifying and tackling tenant payment problems early, or face the prospect of a property that is neither providing an income, nor able to be quickly filled.
“With this in mind, landlords should balance getting the best possible rental income from their property with making sure rental payments are affordable for prospective tenants in the long-term.”
