An easing in the demand for rental property and a rise in the numbers of tenants struggling to meet their monthly rent payments signals that the rental market may be softening, new research suggests.

According to ARLA’s latest research, in Q4 2011 just over half (55 percent) of ARLA members reported more tenants than properties available. While this indicates that demand is still robust, the figure is sharply down on Q3, when three quarters (74 percent) of members noted that trend.

The number of consumers actually signing a new tenancy was consistent with Q3, with an average 34 new tenancies signed per ARLA member office during each quarter. The figure was lowest in Central London, where an average 26 tenancies were signed per branch during October - December, compared with an average 31 in Q3.

Over the same period, 39.2 percent of members reported an increase in tenants struggling to pay their rent; up from 36.7 percent the previous quarter.

Tim Hyatt, president of ARLA, said: “The apparent drop in demand for rental properties could be due to the traditionally quite pre-Christmas period. At the same time, it could indicate a reversal of the surge of new tenants who turned to the PRS when they could not afford to buy.

“With household income decreasing and job uncertainty prevailing, it could be that increasing rental arrears is a sign that the wider economic malaise is having a tangible impact on personal finance - some consumers may have reached the limit of their access to finance, while others may be cutting back as many commentators have predicted.

“We are reassured by the fact that the number of new tenancies is stable, but we will be watching the market closely in the coming months to determine how significant these latest figures will prove to be.

“In tough economic conditions both landlords and tenants can find themselves struggling to keep up with rent or mortgage payments. It is therefore more critical than ever to take references and conduct thorough research before signing a tenancy agreement. Seeking advice from a professional, licensed letting agent is the best way to ensure tenants and landlords’ rights are protected.”

• The tax deadline is fast approaching and landlords need to get returns in and make their payments by 31 January.

However, according to The Landlord Syndicate, a network of companies providing a complete support centre for landlords, record low interest rates and rising rental income could see some landlords hit with a higher tax bill than they may have anticipated.

In a recent survey carried out by Tax Insider, a member of The Landlord Syndicate, when asked what advice was most required, 52 percent of landlords stated they required greater tax saving tips.

Amer Siddiq, MD of Tax Insider said: “Over the last few years, the buy to let market has grown substantially and with it, many landlords have been able to profit from the ever-increasing rental income and record low interest rates.

However, in a large percentage of cases, how much tax a landlord has to pay as a result of the size of their portfolio and having fewer outgoings to offset against tax, will be crucial to how profitable their investment really is.”

When asked what the greatest challenges were facing them in 2012, 40 percent of landlords said reducing their tax liability. HMRC has the powers to investigate a landlord’s affairs to ensure they are paying the correct tax, but according to Siddiq, too many landlords pay an unnecessary tax bill due to poor record keeping, missing receipts, forgetting to claim expenses and even wrongly claiming expenses.

He said: “It’s vital that landlords are knowledgeable about what offsetting opportunities are available to them.

For example, most landlords are aware they can offset tax against their mortgage interest, rates and repairs.
“However, many fail to claim other costs such as travel to and from the property, advertising costs and phone calls, all of which may seem insignificant, but can certainly add up over the year.”