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.
Rising rents
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.
AFS Value
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]
