The Times have reported that it is likely that landlords are facing a gaping in hole in their finances when furlough comes to an end.
Many buy-to-let landlords across the UK, including in London, have experienced average rents increased in the early months of 2020, with tenants paying £959 a month on average in March, up from £942 a year earlier, according to the Homelet Rental index.
However, this growth in rental income could slow — or even fall — as the impact of the pandemic comes to light.
The supply of rental homes remained steady during lockdown, with Zoopla experiencing a modest 3% decline in listings. However, demand for lettings is far from normal. Figures from the data company TwentyCI show demand is about two thirds the level it was in the same period last year, while the supply of rental housing is almost the same.
The rental market has proved resilient so far, but the crunch point will be when the furlough scheme ends. About ten million workers — a third of the private sector workforce — are estimated to have been furloughed. The scheme at present pays 80 per cent of staff wages, but this will be phased out gradually. From August employers will have to start paying the national insurance and pension contributions of furloughed workers, with staff allowed to go back to work part-time.
With the Bank of England predicting that the UK is heading for its worst recession in 300 years, it’s a question of whether businesses will survive once the furlough scheme stabilisers have been removed.
Unemployment levels jumped by 50,000 to 1.35 million in the three months to March, and economists are expecting the number of people out of work to double in the coming months. This will inevitably have an impact on tenants’ ability to pay rent, and many could fall behind on their payments.
Compared with homeowners, renters are more likely to be in less secure jobs, working in the retail or hospitality sectors, which are more vulnerable to collapse. Research from Citizens Advice found that 2.6 million renters have missed a rent payment or expect to fall behind because of financial issues related to the pandemic.
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