This year is likely to be a challenging time for letting agents, following a raft of changes introduced by the government prompting concern that fewer homes will come onto the market, as vast numbers of landlords will be forced to exit the sector, restricting the level of housing stock agents have to offer.The phasing out of mortgage tax relief from April 2017, coupled with the introduction of more stringent buy-to-let mortgage lending conditions as the Prudential Regulation Authority seeks to cool existing lending practices in the sector, will inevitably push some landlords out of the market.
There has already been a sharp decline in the volume of buy-to-let valuation instructions since the introduction of the 3% stamp duty surcharge on additional properties in April and the scrapping of the 10% ‘wear and tear’ tax relief for landlords who rent out furnished homes, with the number of valuations carried out for the buy-to-let sector having fallen by 18.5% over the past 12 months, according to Connells Survey & Valuation.
The proposed ban on letting agent fees is widely viewed as a excessive measure within the letting industry which will have an adverse impact on the rental market and in particular, tenants.
According to the charity Citizens Advice, fees currently cost tenants an average of £337 per person, but ARLA advises that approx £200 per tenant is a more realistic figure for fees relating to a range of administration, including reference, credit and immigration checks, as well as the drawing up of tenancy agreements and all associated paperwork.
Recently ARLA managing director, David Cox (below), said: “These costs enable agents to carry out various critical checks on tenants before letting a property. “If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents. The banning of fees will end up hurting the very people the government intends on helping the most.”
So rent price rises are on the horizon......?
A recent survey online letting survey found that currently 40% of landlords plan to increase rents if existing tenant fees are passed onto them to pay. Only a third of the respondents questioned said that they would definitely not raise their rents, meaning that potentially two-thirds of tenants, or up to 2.6 million renters, could face a permanent increase in rent as a direct result of last month’s announcement.
Frustratingly for everyone involved, this research suggests that landlords will be left with no choice but to further increase rent.
The warning is that tenants could end up paying up to three times as much as they currently do, if tenant fees are banned. For people paying a monthly rent of £1,000, a 3% rent increase to cover the cost of any banned fees would mean that - over an average tenancy duration - a tenant could end up paying three times as much as the fee would have been.
Everyone in the industry is saying that it doesn't make sense so why are the government not listening?? Currying popularity and favour with voters would be my thought.
I would like to think that if you ask any long-term landlord - or tenant - they will tell you that good letting and managing agents are worth their weight in gold. A reliable agent that helps to provide landlords with a stress free investment, which includes sorting any problems for them relating to their rental property, providing access to a network of plumbers, electricians, and handymen or women, who can get things fixed straight away, do essential maintenance swiftly and at a fair cost and keep tenants happy, will always be in demand.
Agents that provide a substandard service will quickly be found out and squeezed out of a market, in which standards are rapidly changing - for better or for worse - owed in part to government changes, designed to increase the desirability of the sector to tenants as a choice of tenure. It’s just a shame that when the government implements these alterations, they are often not fair on all parties, especially landlords and letting agents.
If you have questions or concerns about how these new changes could affect you including your options please get in touch.
Best regards
Richard
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