Rents for tenants across the UK could rise by between 2% and 3% in 2017 if landlords are forced to pick up letting agent fees that are charged to tenants currently, says one City analyst.
James Fletcher works for Cenkos Securities and he says that for a letting agent who is a franchise of a larger network they will have tenant fees accounting for up to 18% of their lettings income every year or 11% of their total income.
Mr Fletcher says that along with the potential of having to pay more in letting agent fees and the changes to mortgage interest offset rules as well as the buy to let stamp duty surcharge means the proposition for becoming a landlord is becoming 'increasingly less attractive'.
A higher income return for landlords
Mr Fletcher also points to Scotland where, he says, the government's removal of tenant fees led to a higher income return for landlords as well as higher landlord fees for letting agents.
Landlords in Scotland also saw their setting up fees increase to £400 from £200 before the ban was brought in.
Letting agents also benefit with growth in total lettings income because landlords passed on the increase to tenants via their rents.
Mr Fletcher says that a ban on letting agent fees in England and Wales will not directly affect the agent’s income but will simply alter who pays the fees ultimately.
Valuations of buy to let properties fall substantially
Meanwhile, it has been revealed that the number of buy to let valuations has fallen by 18.5% since the 3% stamp duty surcharge was introduced in April.
The news comes from the Connells Group who says that the proposed ban on letting agent fees will unsettle the buy to let market still further.
The firm adds that 2016 has been a difficult year for landlords with a buy to let property since they've had to deal with a number of tax changes brought in by the government which has led to investors worrying about low profit margins and making a loss on their investment.
Landlords could be pushed out of the buy to let sector
Connells is also predicting that some landlords could be pushed out of the buy to let sector as a result of these tax changes.
From their figures, the firm says that the number of buy to let valuations being carried out slipped by 6.1% in November compared to October and by 18.5% on an annual basis.
Connells' corporate services director, John Bagshaw, said landlords have struggled with the 3% stamp duty surcharge as well as the removal of their 10% wear and tear allowance.
However, while the number of buy to let valuations have fallen, the number of remortgaging valuations rose by 20% over the year with homeowners keen to lock into low interest rate deals before rates rise.