What impact has the tenant fee ban had?
Ever since the autumn statement in 2016, the potential impact of the tenant fee ban has received widespread coverage. While many tenants were positive about the changes it did present the prospect of a major change for the letting agents.
Almost five months into the ban there is evidence that the ban has had an impact on the sector in a number of ways. One is rising rents, with recent research indicating record rents across the UK, in all but two regions. Rents are likely to be driven up by two factors, both of which may be influenced by the ban.
Firstly there is a reduction in the number of rental properties available, as some landlords exit the market, deterred by the changes to the tax regime and the introduction of the fees ban. With demand for rental properties strong this creates an upward pressure on rents.
In addition to the impact of supply and demand there is also some evidence that some agents are passing on additional costs to landlords, which is in turn being passed on to tenants. Recent research revealed that 98% of agents had lost some revenue as a result of the ban and 80% had increased fees to landlords. A prominent example is Martin and Co. who have increased fees to landlords by 10% and by doing so managed to recoup the losses from fees lost to the ban significantly earlier than expected.
However, not all agents are confident enough to pass on such increases. Foxtons are a notable example, recently announcing a 4% decline in revenue for their lettings division as they have not increased fees to landlords. Their approach has been to attempt to increase market share and manage their cost base.
Cost cutting and consolidation
This cost cutting has in turn has led to some major suppliers to the industry feeling the impact of these changes. A high profile example is the Home Let and Let Alliance merger. As a result of the merger they will operate under the Barbon Insurance banner. The new company have taken these measures to respond to what they call ‘tough’ market conditions, citing in particular a number of Letting Agents consolidating or cutting costs.
Another impact has been concern from some agents that they are compliant with the new legislation. In a recent survey, 21% of agents expressed concern that they were operating in line with the regulations, which is a cause for concern, given the potential consequences of this.
Long term trend
Current indications are that these trends are set to continue with significant numbers of landlords continuing to exit the market. To add to the challenges recent research from property industry eye revealed the cost of advertising on major property portals such as Rightmove had doubled in the last five years for single branch agents, with many paying £1,200 per month. Such increases make it harder for agents to manage all of their cost base to offset loss of revenue.
In this context AFS has held its low price point for advertising at £18 per month per property (plus VAT) and offers real time feeds to agent for a modest £99 per month (plus VAT), while delivering a significant increase in the number of enquiries generated.
For more information contact the team at AFS on [email protected]