Coronavirus could worst case cost BTL sector £14.9bn in 3 months

Coronavirus could worst case cost BTL sector £14.9bn in 3 months

14:57 PM, 19th March 2020, About 4 years ago 8

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The latest research by Ome has found that the impact of the Coronavirus could cost buy to let landlords nearly £14.9bn should tenants be unable to pay rent during the three month support period announced by the government yesterday.

Last night the government announced that they would suspend new evictions and halt new possessions proceedings to the court while the Coronavirus crisis persists. They have also protected landlords as well as tenants with a three-month mortgage payment holiday on buy to let mortgages.

However, if tenants simply can’t pay, this holiday will do little to help landlords who will still have to pay once the three months is up, with or without the rental income from their tenants.

Ome’s research shows that there are 5.2m households currently within the private rental sector alone and without the ability to work and pay their rent, the buy to let sector could see a loss of £4.97bn every month based on the average monthly rent of £955 alone. Over three months this climbs to a huge £14.9bn.

Nationally, this lost income is highest in England with potentially £11.6bn lost in rental income, while London is home to the biggest sum regionally with a potential £4.9bn lost in three months alone.

What does this mean for the average landlord?

There are some 2.6m landlords operating within the UK buy to let sector meaning the average landlord has a portfolio of two rental properties. With an average rent of £955 and a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in rental income.

With a ratio of 2.1 properties per landlord in Scotland, the loss is at its greatest at £6,146 over three months with Northern Ireland also high at £6,083.

Not only does this huge sum have implications on a sector that has already seen its financial return stretched by the government, but it could see tenants out of pocket even further should landlords look to keep their tenancy deposit to account for lost rental income.

Co-founder of Ome, Matthew Hooker, commented:

“It’s great news that the government are providing some financial respite for the nation’s landlords, however, it’s more of a weekend away than a holiday and once expired, UK landlords are still facing the cost of a buy to let mortgage without the rental income to pay it.

It’s by no means the fault of the tenant if they are unable to pay but there is a very real chance that landlords will turn to the rental deposits at the end of a tenancy in order to recoup this lost rent. While this would be unfair on a tenant who has otherwise kept the property in good order, it may well be the case that landlords are simply left with no choice.

The silver lining at least is that hopefully, not all tenants will be unable to pay their rent and so this sum of lost rental income should reduce, but whichever way you look at it, the UK rental sector is in for a tough few months.”

Location Private renters Average rent (2019) 1 month B2L lost revenue 3 months B2L lost revenue
London 964,000 £1,697 £1,635,908,000 £4,907,724,000
South East 713,000 £998 £711,574,000 £2,134,722,000
South West 474,000 £816 £386,784,000 £1,160,352,000
East of England 437,000 £869 £379,753,000 £1,139,259,000
North West 571,000 £621 £354,591,000 £1,063,773,000
West Midlands 405,000 £662 £268,110,000 £804,330,000
Yorkshire and the Humber 427,000 £617 £263,459,000 £790,377,000
East Midlands 359,000 £628 £225,452,000 £676,356,000
North East 202,000 £533 £107,666,000 £322,998,000
Number of private renters
England ONS: English Housing Survey
Scotland Scottish Household Survey
Wales ONS: UK private rented sector
Northern Ireland ONS: UK private rented sector
Average rent
UK HomeLet
Individual nations and regions ONS

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Ian Narbeth

9:51 AM, 20th March 2020, About 4 years ago

"Coronavirus could worst case cost BTL sector £14.9bn in 3 months." We're doomed. Doomed I say.

Oh, no it couldn't. The article assumes that every tenant in the land simultaneously stops paying rent and is then unable to pay arrears later. Landlords are worried enough already without this sort of warning.


10:28 AM, 20th March 2020, About 4 years ago

A huge contributory factor to any potential loss must surely be the high rates on funding and especially on renewing a fixed term.

The BoE supposedly reduced the main lending rate to support business which is fair enough and although new lending rates are better than for existing borrowers they are still clearly way above the cost of funds. We had to roll over (in more ways than one!) yesterday and the cut had made not one scintilla of difference to an earlier illustration. Furtherore, lenders must also know of the near impossibility for landlords with even highish flats to remortage away and are between a rock and a hard place given the current fossilisation of the property market viz the MCHLG "non" guidance and we don't even have any cladding, it's purely the unavailability/unpreparedness of the required third party professional and procedures to sign it off! Six months is our best estimate and that's pre COVID-19 whichh basically writes of this year.


10:35 AM, 20th March 2020, About 4 years ago

Reply to the comment left by Ian Narbeth at 20/03/2020 - 09:51
I think it is sensible to highlight the potential problem to put pressure on the Government which for too long has assumed landlords have pots of money.
I have two properties. One are making all the sounds to prepare me for not paying rent by saying, they are all self isolating because the six year old son has a bad cough!
I am retired and depend upon the income as part of my pension to live and do not have a BTL mortgage so that morsel from the Government wont help me in any way.


11:18 AM, 20th March 2020, About 4 years ago

Reply to the comment left by Ian Narbeth at 20/03/2020 - 09:51
Being realistic and making a plan is better than pretending its not going to happen. Plan for the worst and hope for the best.

I have 15 properties and already had 2 tenants tell me they can't pay their rent - so far. I have a large student property coming empty 1st July and the college is closed so its likely to be empty which will cost me £2,500pcm. I am being asked to give unsecured loans to tenants at zero interest for 3 months and will probably be asked to do it for another 3 months after that.

I still have bills to pay regardless of income and will certainly not be doing any big jobs/improvements.

Paul Essex

11:39 AM, 20th March 2020, About 4 years ago

Jumping ahead, how are we to recover losses? Say a 600 month suspended for 3 months (possibly more) is an 1800 loss even with a 100 monthly increase that's a year and a half. What happens if they move before the end - I cannot see how we can enforce this.
PS rental is my only income and my self employed partner has just been laid off so not in a good place to ride the storm.

Ian Narbeth

11:39 AM, 20th March 2020, About 4 years ago

Reply to the comment left by JB at 20/03/2020 - 11:18
JB, I did not suggest there was not going to be a problem. My gripe is with scare-mongering headlines.


11:42 AM, 20th March 2020, About 4 years ago

Reply to the comment left by Ian Narbeth at 20/03/2020 - 11:39
I agree but we need to be prepared.
Stay safe.


13:57 PM, 11th November 2020, About 3 years ago

Eight months later and the world is different, I am now having to complete an MCHLG "EU State Aid" declaration in respect of Robert de "Generate's" cladding farago even though we have no ACM, not a sq inch, mainly just local planning and building control failures, in one week's time we'll be at 80% void and enquiries are as flat as pancake, basically we're......................

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