How will 'Lifetime Deposits' change the South Shields rental market? - Goldfinch Estate Agents
With South Shields tenants deposits totalling £2,842,788, just how will ‘Lifetime Deposits’ change the South Shields rental market?
In this article, I want to look at these lifetime deposits. How could the Lifetime Deposit Scheme work, and how could they benefit both South Shields landlords and tenants?
The average deposit for a South Shields rented home stands at £663.
Now, of course, it’s vital that any new ‘deposit scheme’ does not dissuade South Shields landlords from making valid claims for damage to properties. Landlords cannot be expected to give up their right of recourse to a security deposit until such time that they are satisfied there will be no need to claim it.
There would need to be some form of system safeguarding that the new South Shields landlord is protected by a whole deposit, even if the deposit on the old South Shields home comes into dispute.
This will be critical and central to South Shields landlords having conviction in the Lifetime Deposit Scheme. That could be something like an interest-free loan for the tenant on the crossover between the properties.
The rules regarding the amount of deposit held by a South Shields landlord were changed a couple of years ago, where only five weeks’ worth of rent can be held as a deposit.
The deposits South Shields tenants have had to save for certainly raises the cost of renting a home.
Some say this extra burden puts another nail in the coffin of the dream of homeownership for many South Shields renters. To give you an idea of the level of deposits held for South Shields rental properties …
The total of all the tenants’ deposits in South Shields is £2,842,788.
Yet the other side of the argument contends that if the South Shields tenant misses more than one month’s worth of rent, the landlord is immediately out of pocket, even before they’ve got the costs of solicitors and any improvement works from the tenant trashing the place.
Does a deposit of just over one month provide South Shields landlords with a decent level of protection against unpaid rent or damage to the property? When you consider …
The total value of all the privately rented properties in South Shields is £639,492,021.
Before I conclude my thoughts to the initial question of ‘lifetime deposits’, the need for decent landlord insurance to ensure you are adequately covered as a South Shields landlord is vital.
It is my opinion the common need for South Shields tenants to stump up a ‘two-fold deposit’ is not helping many South Shields renters when moving home. It’s clear the standard cash down deposit is not fit for purpose for the 21st Century.
Of course, a handful of South Shields landlords will decide to sell their rental portfolio because of the White Paper. The same happened in 2016 when the increase in landlord taxes were announced.
However, this will reduce the supply and availability of South Shields rental properties, meaning rents will rise (classic textbook supply and demand), thus, landlords return and yields will rise.
Yet, because tenants still can’t afford to save the deposit for a home and we are all living longer, the demand for rental properties across South Shields will continue to grow in the next twenty to thirty years. The reason being we are still not building enough homes to accommodate our growing and ageing population. This means we will turn to more European ways where the norm is to rent rather than buy in their 20s and 30s.
This means new buy-to-let landlords will be attracted into the market, buy properties for the rental market in South Shields and enjoy those higher yields and returns. Isn’t it interesting that things mostly always go full circle?
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