Wednesday, 27 October 2010

Will the Government Spending Review impact your tenants?

HomeLet the Landlord and Tenant property insurance company has just sent out it's latest news letter to aagents. jml Property Services have been HomeLet agents for many years now.

The Coalition Government has put deficit reduction at the heart of its economic policy, arguing that the poor state of the UK's public finances poses a greater threat to economic recovery than cuts in spending.

According to the independent Institute for Fiscal Studies (IFS) the government's Budget measures will cut 77% of the £86bn through spending cuts, and the remaining 23% through tax increases. These cuts are likely to have a huge impact in most areas of the UK.

In cities like Liverpool the problem is exaggerated by the fact that almost 40% of all employment is in the public sector which faces the most change, this is an additional burden on the economy of Liverpool – hindering its recovery from the effects of the worst recession in living memory.

The number of tenants defaulting on their rent is likely to soar following minimal change in the rate of unemployment which is currently standing at 7.8% and additional job cuts which are likely to feature as a result of public sector spending cuts.

Commenting on the cuts HomeLet Managing Director John Boyle, said “Unemployment will get worse over the next few months as the affects of spending cuts start to have an impact on local economies. This could impact many tenants’ ability to pay the rent. For many landlords, especially those with geared investments the risk of rental arrears is a real worry.

“In 2009 we paid out £3m in Rent Guarantee claims and I expect this figure to rise in 2010, and in 2011. Landlords who are concerned about rent arrears need to talk to their local professional letting agent about comprehensive referencing and rent protection insurance.”

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