Commercial property: Counting the cost of coronavirus

Research by deposit replacement scheme Ome has found that the impact of the coronavirus could cost buy-to-let landlords almost £14.9 billion should their tenants be unable to pay rent during the three-month support period announced by Westminster last week.

The UK Government outlined last Wednesday that it would suspend new evictions and halt new possessions proceedings in the courts while the coronavirus crisis persists.

The move has 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.

The research by Ome, owned by the Borehamwood-based letting and landlord insurance firm Hamilton Fraser, shows that there are 5.2 million households currently within the UK private rental sector, and that 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.

Nationally, this lost income would be 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 over the three-month period.

But there are some 2.6m landlords operating within the UK sector, meaning the average landlord has a portfolio of two rental properties.

With a loss of three months’ rental revenue across both properties, they could be facing an individual £5,730 shortfall in average rental income.

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

Not only do these sums have implications on a sector that has already seen its financial return stretched by Westminster, but it could see tenants out of pocket even further should their landlords seek to keep their deposit at the end of a tenancy to account for some of the lost rental income.

Matthew Hooker, co-founder of Ome, comments: “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 – whichever way you look at it – the UK rental sector is in for a tough few months.”