Letting Agents:

New research into landlords’ intentions by the UK Association of Letting Agents (UKALA) indicates that around half (47 per cent) would stop using letting agents and move to managing their own rentals if their profits fall significantly*.

It is anticipated that the coming changes to landlords’ taxation, where mortgage interest relief will switch to income rather rental profits, among other changes, will hit landlords’ returns. It will especially affect those high rate taxpayers with large mortgage commitments. Some 60% of landlords are said to have no mortgages, so these may not be much affected.

However, the National Landlords Association (NLA) has calculated that more than 400,000 landlords will be pushed up a tax bracket as a result of the changes. These people will be forced to look at ways of reducing costs, and one way to do that would be to save on one of their biggest outgoings, the fees they pay to agents.

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The news comes on top of another blow to agents after the Chancellor in his Autumn Statement announced a ban on fees, fees that agents traditionally levy on tenants when they rent a property through them.

It means that the fees agents charge landlords will almost certainly need to be higher because of this, and also because of the additional work agents need to do when letting a property due to the increased amount of administration work needed to comply with the raft of new letting regulations introduced over the last 18 months.

The UKALA findings show that just over half – 57 per cent – of all UK landlords, or around 1.1m, use a letting agent, with 36 per cent regular users, and 21 per cent occasional users. Many employ agents on a let-only basis, while others pay for full management.

More landlords in Scotland would stop their agent if their profits were down (56 per cent), more than anywhere else in the UK. However, just one in three landlords (29 per cent) in the West Midlands would forego their agent – the lowest across the UK. See a full regional breakdown below.

The findings also show that a quarter (26 per cent) of landlords who use letting agents to fully manage all of their properties would stop using them if profits fall. This drops to a fifth (21 per cent) of landlords who use agents on a let-only basis for all their properties.

A third (36 per cent) of landlords would retain the services of their agent even if their profits were compromised.

Richard Price, Executive Director of UKALA, says:

“A significant number of landlords will be hit hard by the tax changes and agents’ fees will be one of the items underneath the magnifying glass if profits begin to decrease.

“As landlords’ costs inevitably rise, agents will need to do more to position themselves as indispensable, and make it obvious that they provide solid value for money.  Otherwise, as future tenancies come to an end, landlords will either shop around or start to consider self-managing their properties”.

Richard Lambert, Chief Executive at the NLA, says:

“Landlords should already be looking ahead to the forthcoming tax changes and working out how they will be able to maintain profitability. That will intensify with the prospect of agents’ fees increasing as a result of the ban on charging tenants.

“However, while it may seem an appealing proposition to minimise your outgoings, the majority of landlords simply won’t have the resources to deliver a service that meets the standards or professionalism that their agent currently provides”.

* Quarterly Landlord Panel – September 2016 (900 respondents)

Full regional Breakdown

Region Would forego agent Would not forego agent Don’t know
East England 54 38 8
East Midlands 44 40 16
Central London 47 36 17
Outer London 52 31 17
North East 42 40 18
North West 50 34 16
Scotland 56 33 11
South East 53 31 16
South West 38 44 18
Wales 49 32 19
West Midlands 29 39 32
Yorkshire 38 38 24

 

Use of agent services Would you forego your agent?
  Yes No Don’t know
Let only for all properties 21% 30% 25%
Full management for all properties 26% 41% 35%
Combination of both for all properties 13% 12% 14%
Occasionally let only 23% 8% 13%
Occasionally full management 13% 10% 13%

 

1 COMMENT

  1. I own a freehold house with a shared driveway. For some absurd reason we have to pay £250 each year to a managing agent for managing our driveway?

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