The boom in rental growth is likely to be at an end, think-tank Capital Economics has warned.
Property economist Paul Diggle says the boom is on its last legs and warned that if its unemployment forecasts are correct, more tenants will be struggling to pay rents.
Eviction specialist Landlord Action said rents would not go down, but said its instructions relating to rent arrears have increased by 12% over the last year, and now comprise 80% of its cases.
It also warned that in the last 12 months, cases directly related to Local Housing Allowance (LHA) increased by 16%.
At Capital Economics, Diggle said: “Although tenant demand is unlikely to wane, above-average growth in rents in the next two years would seem unlikely.
“A recent report by Shelter indicated that two million households have resorted to paying their rent or mortgage with a credit card in the past six months, a situation that is clearly unsustainable.
“Similarly, the Q4 survey from the Association of Residential Letting Agents reported a rise in rental payment problems, and there are good reasons to think that these problems will intensify in the next few years.”
The economist said that reforms to LHA which start in April and which will cap benefits paid to tenants in private rented accommodation, will put further downward pressure on rental growth.
Diggle said: “Many of the reasons why more tenants will have difficulty paying their rent will also lead to borrowers facing problems meeting mortgage payments.
“But while borrowers might be able to come to arrangements with their lenders to extend the term of their mortgage or take a payment holiday, tenants have to find relief by negotiating reduced rents.
“The upshot is that, on average, landlords will struggle to see more than 2% year-on-year growth in rents this year and next.”
Paul Shamplina of Landlord Action said that some landlords would not be able to afford to accept reduced rents from LHA tenants. He did not think rent levels would sink but warned of increasing arrears.
“Landlords facing repossession action due to mortgage arrears caused by non-payment of rent by tenants is likely to continue,” he said. “We expect interest rates to remain low but advise landlords to be cautious, especially if they have high gearing on their property portfolios.”
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Comments
That was 40 years ago my old old Type 79 Austin 7 Jaloppy.
Of course I knew what a Knob Jockey is but I was testing out the disparity of euphamisms on EAT. Nat is happy for the readers to be insulted but it seems some advertisers are immume.
Gourmand Gossip, your photograph is quite small is it of you sitting in a bath chair?
Gourmand Gossip, surely you of all people know what a knob jockey is it, your name's a bit of a giveaway.
Oh I'm all chastened.
"Big" Don: You ain't big - and you certainly ain't clever if that is your best shot at a comment...
Sorry Don, this news story is just another blogger whose ego is out of control. Quite what a Knob Jockey is I have no idea but I am guessing with a handle like Big Don you have probably got a fair fair amount of experience in that department presumably as the Horse?
The thing is Don as with the numpties who think prices are going to fall to a level they can afford, the demand for accommodation is not going to go away and therefore this industry will simply continue steadily onwards housing folk who can afford to be housed and taking a commission from vendors and landlords. Sorry old son the udders are full and ready to be milked each evening.
As another cash cow door shuts, you lazy knob-jockeys may actually have to work for a living.
Re read your own post and think a tad harder, If one can't afford to buy but one can afford £1 more rent than a Shapps evictee, rents will rise by £1 simply because one needs somehere to live.
With no social housing available, with a 30 applicant /property shortage of private rented accommodation already. With a rise in mortgage rates reducing rental yields. Either there needs to be mass evapouration of applicants or someone has got to magic up a fair few rental properties for there not to be a constant pressure on rents.
Common sense. Whereas house prices are pretty much determined by ability to borrow, which in turn is determined by how tight or loose bank lending policies are, rents are determined by ability to pay.
House prices trebled in a decade not on any great new wealth coming into the country, but on loose lending, high income multiples and a lalala fingers in the ear approach to debt/reliance on continued low interest rates forever.
With those conditions removed, probably permanently, hard to see where any upward movement is going to come from.
Renters are getting a great deal though especially in larger properties where 2-3% yields are commonplace and the rental is half what a new mortgage would be.
Yvette Cooper is an economist, she didn't have a clue either.
All these folk won't simply evaporate, if they can'y pay their rent they get served notice and add to the rent pressure on the lower rent properties. Errrrr what happens when there is over demand? Thats right Mr Diggle there is a pressure for rents to rise at the lower end at that simply dominoes up the houing chain.