British tenants are falling futher behind in their rent payments, according to a benchmark survery of arrears, amid one of the most difficult economies in a generation.
The total amount of late or unpaid rent in England and Wales in December stood at £326m (€389m, $521m), up from £241m in November, reaching the highest level in nearly a year according to LSL Property Services' latest buy-to-let index. The rental dues represent 10.1 percent of all rent.
"After two months of improvements, the festive period has taken its toll on tenants' finances. December always sees a step backwards, and last month was no exception as the total amount of rent owed hit levels not seen since last Christmas," said David Brown, commercial director of LSL.
"In the absence of real salary increases in 2012, the additional burden of higher rents was met by tenants cutting back on other essentials. But over December, the month's extra spending has led to many more falling behind again. In the longer term, with rents likely to rise, falling arrears will be tied to the labour market moving forwards, rather than retreating."
The study also found that the average rent declined by about 1 percent to £734 per month, taking rental costs to the level seen in August 2012. However, rents are still 3.2 percent higher than the levels of 12 months ago.
The decline in rental rates across the country was for the second month in a row, but LSL viewed the development as seasonal. LSL, which owns the UK's largest lettings agent network including national chains Your Move and Reeds Rains, added that the decline is unlikely to last for long due to the strong demand for rentals from people still unable to buy a home.
"Rents have returned to August levels, but it's a seasonal blip rather than an about-turn in the market," said David Newnes, director of LSL.
"Tenants were in a stronger bargaining position as landlords reduced rents to fill empty properties in the slower winter months, yet as the New Year progresses the underlying weakness in the mortgage market will mean competition will heat up once more."
The consumers looking to climb the property ladder leaving the rental market are facing long-term problems, with the Funding for Lending Scheme proving a double-edged sword, LSL noted.
"While rates are coming down for those with large deposits, extremely low saving rates are hitting those still trying to pull together a deposit - a problem accentuated by the record low base rate," said Brown.
In London, rents declined by 1.5 percent from November to £1,087 per month. At the current rate, the rents are still 6.3 percent higher than the year-ago levels.
Rents declined by 1.7 percent in the East of England and the North East, while they rose in the West Midlands, the South West and Wales by 1.3 percent, 0.9 percent and 0.4 percent, respectively.