Many mainstream buy-to-let publications reported this week that UK Finance had reported an increase in arrears in the buy-to-let sector. This made for an eye-catching headline and no doubt caused some landlords, particularly those with large portfolios some concern, as rising arrears in the sector are indicative of problems in the economy and tenants falling behind on their payments.
However it’s far too early to be too concerned by the data, and we don’t expect many professional landlords to change their outlook as we continue to move through a turbulent, Brexit-fueled period of flux in the economy as for many landlords, their expansion and purchase plans have already been tempered by concerns over property values and tenants income and prospects post-Brexit.
And yet there are only small signs of any headwinds in the property sector. Rents are broadly increasing nationwide and the new build sector continues to report strong sales despite the price of a family home in many parts of the country now exceeding half a million pounds.
UK Finance reported the percentage increases in raw terms – eg a 12% year-on-year increase in buy-to-let properties where the landlord is in serious arrears with the lender. However they are also prudent to note that the original base was so low as to make it insignificant in the sector as a whole. It would have been better to see more focus in the mainstream investor press on this point rather than the alarmist headlines about an increase in arrears.
Although there have been some increases in buy-to-let arrears, these are small and from a low base.
Landlords may be more inclined to invest in insurance products that protect their rent payments in the event of tenant default and make sure they continue to be paid on time even if their tenants have lost their jobs, or become unwell. And I certainly wouldn’t look to discourage any landlords who would not be able to fund their portfolio through the difficult process of eviction and finding new tenants from taking out suitable protection, but at the same time I don’t think now is the time to panic about an increase of properties in arrears that amounts to a change from 0.23% of all buy-to-let propeties to 0.24% over the course of what has been a challenging year for the UK economy.