Landlords feeling the pinch as half are hit by tenant arrears

Friday 17th February 2012

Rents may have risen in the private sector over the last year, but more landlords are feeling the pinch, with half having experienced arrears.

The latest findings from a quarterly Landlord Panel reveals the biggest rise in the number of portfolio landlords making a loss since the Landlords Panel was begun by BDRC Continental in 2006.

In the fourth quarter of 2011, the number of ‘portfolio landlords’ – those with 20 or more properties – who reported making a loss rose from just 1% in the third quarter of 2011 to 8% in the last quarter of the year.

At the same time, while portfolio landlords reaped the highest rental yields at 7%, average rental yields for all landlords fell in Q4 2011, down to 5.9% from 6.7% in the previous quarter.

In the last quarter of 2011, rental yields for all landlords fell to their lowest level in the year. This was despite almost half (46%) of landlords having increased rents for tenants in the previous 12 months and one in three (34%) planning to do so during the first half of 2012.

However, BDRC Continental’s research reveals that landlord sentiment remains upbeat, with 80% saying they feel positive about being a landlord. 

This may be because the number of landlords reporting a recent void period in their property fell from 41% in the third quarter of 2011 to 36% in the fourth quarter.

But while half of landlords have actually experienced arrears, it is a major concern for all landlords.
 
Mark Long, director for BDRC Continental, said: “Unsurprisingly, in a difficult economy a larger portfolio of property brings greater exposure to risk and those landlords are clearly feeling the impact of rising costs and a decline in profitability.

“This is the highest level we have seen of landlords with 20-plus properties making a loss, and the biggest increase between one quarter and another.

“In previous waves of the research, the highest figure of loss making for this group was 4% in the third quarter of 2009. Some landlords are clearly feeling the pinch.”

The research was based on 550 interviews with members of the National Landlords Association.