Rental deposit amounts compared to economic investment

by Property 118

0:01 AM, 21st February 2020
About 5 months ago

Rental deposit amounts compared to economic investment

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Rental deposit amounts compared to economic investment

The latest research by rental deposit replacement scheme, Ome, has looked at the total sum used as rental deposits and how this compares to the levels of investment pumped into the economy, both at the top line and in various sectors.  

Ome’s research shows that last year just over £5.2bn was held in rental deposits across the letting sector, with 4.6m tenancies seeing the average tenant fork out £1,139 to secure a rental property.  

Over the last year, total business investment in the UK reached £198bn and while the money used as traditional deposits only equates to a small percentage of that, if it was available to the wider economy it would single-handedly boost UK business investment by 2.6%.

While 2.6% may sound insignificant, looking at rental deposits as a proportion of investment into sub-industries and sectors puts the huge sum into perspective.

The £5.2bn held in traditional deposits last year far exceeds investment into a number of sub-industries and was more than 10 times the sum invested into textiles, leather, clothing and footwear and six times the sum invested into solid fuels and oil refining within the UK.

It also exceeded the sums invested in metals and metal goods (182%), food, drink and tobacco (137%), health and social work (135%), hotels and restaurants (132%), other manufacturing (120%) and chemicals and man-made fibres (119%).

Investment in the UK real estate sector is quite rightly much larger than most of these other sub-categories and over the last 12 months, there has been £35bn pumped into the UK property market.

However, this huge sum of rental deposits being held across the nation is still notable enough to equate to 15% of this total investment.

Co-founder of Ome, Matthew Hooker, commented:

“It’s quite astonishing when you consider the total sum used as rental deposits across the nation and especially when you compare this with investment into the UK. It really puts into perspective just how much money it actually is.

To think it exceeds the annual investment seen in a number of UK business sectors, and nearly three percent of total UK business investment in the last 12 months, is remarkable and makes you think how useful these huge sums of money can be when put to good use.

Of course, we appreciate that these unutilised tenant funds are unlikely to be ploughed into the UK business sector via investment if they weren’t tied up, but it does demonstrate the huge sums being held by landlords and agents and the sheer size of financial security the nation’s tenants must collectively put down when looking to rent.

Just think what else this money could be doing and the good use the additional cash flow could have to a tenant’s rental wellbeing? Hopefully, as we move more and more towards tenant focussed replacement schemes such as Ome, we may one day find out.”

Industry Sub-industry group Sector Investment  2018- 2019

£million

Value of deposits as

% of sector investment

Total business investment UK x x £198,092 2.60%
Manufacturing > Private sector x x £31,011 16.90%
Non-manufacturing > Private sector x x £161,906 3.20%
Private sector > Manufacturing Solid fuels and oil refining x £825 635.10%
Private sector > Manufacturing Metals and metal goods x £2,872 182.40%
Private sector > Manufacturing Chemicals and man-made fibres x £4,418 118.60%
Private sector > Manufacturing Engineering and vehicles x £14,488 36.20%
Private sector > Manufacturing Food, drink, and tobacco x £3,826 136.90%
Private sector > Manufacturing Textiles, leather, clothing, and footwear x £499 1050.00%
Private sector > Manufacturing Other manufacturing x £4,383 119.50%
Private sector > Non-manufacturing Other production x £32,579 16.10%
Private sector > Non-manufacturing Construction x £8,961 58.50%
Private sector > Non-manufacturing Distribution services x £16,331 32.10%
Private sector > Non-manufacturing Other services x £104,036 5.00%
Private sector > Non-manufacturing > Other production Other production Electricity, gas, water £18,804 27.90%
Private sector > Non-manufacturing > Other production Other production Agriculture, forestry, fishing £6,417 81.60%
Private sector > Non-manufacturing > Other production Other production Mining and quarrying £7,358 71.20%
Private sector > Non-manufacturing > Other services Other services Financial intermediation £10,540 49.70%
Private sector > Non-manufacturing > Other services Other services Hotels and restaurants £3,982 131.60%
Private sector > Non-manufacturing > Other services Other services Transportation and storage £9,702 54.00%
Private sector > Non-manufacturing > Other services Other services Information and communication £22,045 23.80%
Private sector > Non-manufacturing > Other services Other services Real estate, renting, and business £35,000 15.00%
Private sector > Non-manufacturing > Other services Other services Education £12,138 43.20%
Private sector > Non-manufacturing > Other services Other services Health and social work £3,889 134.70%
Private sector > Non-manufacturing > Other services Other services Other services £6,740 77.70%


Comments

Hardworking Landlord

11:46 AM, 21st February 2020
About 4 months ago

Perhaps its just me, but this article seems completely bonkers!

The five week deposit held on most of my properties is on average £865. The average cost to re-carpet a property after a 'non-well behaved' pet has been allowed to ruin is around £1,200. I would suggest that the funds held for a deposit are very much needed and have been put to good use. If you remove the possible loss of a deposit to the tenant, why will they take any care over your property....

Seething Landlord

12:43 PM, 21st February 2020
About 4 months ago

This article is economically illiterate. The money held as tenancy deposits is not stashed away under somebody's bed but will be in a bank account and reinvested by the financial institution wherever it will give them the best return i.e. the money remains in circulation.

The Forever Tenant

14:19 PM, 21st February 2020
About 4 months ago

Am I right in thinking that the deposit schemes keep the interest from the deposits as their fee to run the system.

As such, would this not mean hundreds if not thousands of workers putting their salary they receive back into the system.

Michael Barnes

4:03 AM, 22nd February 2020
About 4 months ago

Just another pointless propaganda piece promoting the removal of money from tenants' pockets for no good reason.

Freda Blogs

9:54 AM, 24th February 2020
About 4 months ago

A very self serving piece of nonsense designed to encourage greater use of alternative deposit schemes, and good government propaganda to beat landlords (again) if they pick up on it.

However Ome should be careful what they wish for. I believe the company that owns them is related to Landlord Action - acting for landlords, so it is not smart to publish a thoughtpiece which will alienate landlords, a significant proportion of their client base....


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