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Letting fees ban is good news for tenants – but beware a backlash


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23 minutes ago, PeanutButter said:

....I'm barely leveraged.

Then you're definitely not representative of many.  It is those who need to sell up that will set the price, those who don't are just passengers but are definitely all in the same boat.  If there's a dash to sell then it will definitely affect the value of your property, whether you cause it or not.

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22 hours ago, bear.getting.old said:

It will not reduce supply/demand though. The number of tenants looking to rent will reduce by the same number as they buy those houses that the landlords have dumped on the market as house prices fall generally. Therefore no underpinning of rents

In the short term would we not see a drop in supply as landlords sell up and the FTBs buy due to how long it takes to sell? I'm assuming if supply is going from LL to FTB rather than another LL they'd also need vacant possession so kick the tenants out and have to eat the voids until it sells, right? 

I know in the last few places we rented before we gave up and bought the landlords were selling and all kicked us out. One even stayed on the market (and empty) throughout the whole of our next tenancy...

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On 26/01/2019 at 19:12, hotblack42 said:

This is essentially true, but landlords exiting the market will reduce supply which will underpin rents. Some tenants unable to buy into the softening property market will lose out, at least initially. Overall its a long term win though, undermining landlords & agents' positions.

Can’t see this underpinning rents, but what has been doing so is the slowdown in sales of newbuilds to landlords. Unless they’re bought by owner occupiers then they stay empty and don’t hit the rental market. But recent signs are that big overseas investors are buying flats in bulk off anxious London developers, so expect rents to fall again this year. 

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8 hours ago, Patient London FTB said:

Can’t see this underpinning rents, but what has been doing so is the slowdown in sales of newbuilds to landlords. Unless they’re bought by owner occupiers then they stay empty and don’t hit the rental market. But recent signs are that big overseas investors are buying flats in bulk off anxious London developers, so expect rents to fall again this year. 

A high probability that there will be more large commercial private landlords to rent from...... competition for small time landlords?......that should drive rents down.?

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In theory, rents will rise.

Not because landlords have higher costs, landlord costs do not affect rents, nor because landlords will sell up, which is totally irrelevant.  

Rents will rise because tenants will have more money to spend on rent, which landlords will take.

I’d be surprised if this showed up in any measurable way, since fees are pretty small compared to rents, and there’s a bunch of other confounding factors.  

 

Edited by BorrowToLeech
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13 hours ago, Tes Tickle said:

Then you're definitely not representative of many.  It is those who need to sell up that will set the price, those who don't are just passengers but are definitely all in the same boat.  If there's a dash to sell then it will definitely affect the value of your property, whether you cause it or not.

Of course. The value goes up and down. 

 

TBH I think a lot of europeans staying away + shed loads of new builds flats completing work will have more of an impact on rents (downward) than landlords having to absorb some fees (offsettable against tax).

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31 minutes ago, BorrowToLeech said:

In theory, rents will rise.

Not because landlords have higher costs, landlord costs do not affect rents, nor because landlords will sell up, which is totally irrelevant.  

Rents will rise because tenants will have more money to spend on rent, which landlords will take.

I’d be surprised if this showed up in any measurable way, since fees are pretty small compared to rents, and there’s a bunch of other confounding factors.  

 

That makes the bold and unfounded assumption people are spending actual money on rents and not credit card DEBT

 

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12 minutes ago, thewig said:

That makes the bold and unfounded assumption people are spending actual money on rents and not credit card DEBT

 

Not really, whatever and however people are paying now, not paying fees means they can (and are willing to) give that money to the landlord.  It’s part of what they currently pay for accommodation. 

That said, I don’t think any theory is really precise enough to make meaningful predictions about this, because other factors are likely to make more of a difference.  I just think it’s important to be consistent.  If rents are set by ability and willingness to pay, then this will increase rents.  

Tenants won’t be any worse off overall and I still think it’s a good policy.

Edited by BorrowToLeech
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On 27/01/2019 at 09:06, LetsBuild said:

I would have thought this ban will make rents fall, if the landlord tries to bang up the rents then the tennant will have the freedom to just move somewhere else which at the moment they can’t because of the huge cost of fees. On a macro scale we will see more transfers and the landlords offering low value will be forced to adjust down or have a string of voids and go bust. Sort of like letting capitalism do its job for once!

I agree. Lowering removal costs makes tenants less 'sticky' and more likely to move if someone does increase the rents. Previously people would probably be happy to pay an extra £50/month rather than £600 now for agency fees plus the whole hassle of moving. 

Supply an demand aside it removes some of the financial friction in moving. 

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The main aim of this legislation was to open up the market for tenants to be able to choose a property. At present with the vast difference in fees a tenant can no choose between properties without being stuck with an agent they have not chosen (the landlord has and he has little interest in what the agency charges tenants- more interested in any commission they take from the rent. If rents go up, as they probably will it should be across the board. Landlords will naturally look for agents with the lowest fees if these costs are to passed over to them instead of the tenant so overall rents should stay the same or, more likely, will drop slightly. As suggested above, the market will become more liquid for tenants as well as easier and less costly to move. We have been renting our place nearly 6 years and must have looked at 10 places in that time and just thought 'nah, not paying those fees'.

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4 hours ago, BorrowToLeech said:

In theory, rents will rise.

Not because landlords have higher costs, landlord costs do not affect rents, nor because landlords will sell up, which is totally irrelevant.  

Rents will rise because tenants will have more money to spend on rent, which landlords will take.

I’d be surprised if this showed up in any measurable way, since fees are pretty small compared to rents, and there’s a bunch of other confounding factors.  

 

Fees are paid out of the cash tenants have in their pocket today, rents are paid out of income streams.

If anything you'd expect the price rise to show up in the other things tenants have to pay for on/around moving day e.g. man with a van, cardboard boxes and packing tape, fish to hide behind the radiators etc.

Edited by Dorkins
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20 hours ago, Dorkins said:

Fees are paid out of the cash tenants have in their pocket today, rents are paid out of income streams.

If anything you'd expect the price rise to show up in the other things tenants have to pay for on/around moving day e.g. man with a van, cardboard boxes and packing tape, fish to hide behind the radiators etc.

If demand rises for those other things, more will be produced. Competition reduces the impact, although not to zero. 

If rents rise, then this doesn’t happen. Anyone who wants to collect the increased rents has to buy existing land, they can’t add to the amount of land available, they can only compete with people looking for houses over the finite resource on which they sit. 

As for the difference between recurring rents and intermittent fees, I fully acknowledge that there may be some differences.  This is exactly the sort of psychological effect economics tends to ignore. In this case, the level of money is just too small, and economics isn’t nearly precise enough to talk about the differences involved, in my opinion. 

So, in theory rents will rise due to this measure. In practice, I expect the true impact to be unobservable. 

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"Brexit has wiped thousands of pounds off London rental growth, saving tenants up to £1,800 since referendum"

https://www.thisismoney.co.uk/money/buytolet/article-6622787/Brexit-wiped-thousands-pounds-London-rental-growth.html

From the link:

  • Uncertainty since the Brexit vote has hit demand for rental properties in London 
  • Combined with tougher tax treatment, this has slowed rental growth
  • Across the rest of the country rental growth has continued as normal 
  • Void periods have increased for landlords over the past three months 
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5 hours ago, BorrowToLeech said:

As for the difference between recurring rents and intermittent fees, I fully acknowledge that there may be some differences.  This is exactly the sort of psychological effect economics tends to ignore.

I think it's interesting to consider from an economic perspective why letting agent fees for tenants reached the level they did - why approx. £200-300 per tenant? Why not £20, or £2000? My guess is that it's the amount of money a low income private renter in the middle of a move can get their hands on at short notice after paying moving costs and the deposit.

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This made me laugh.

http://www.thebusinessdesk.com/yorkshire/news/2032948-listed-estate-agency-in-strong-financial-positions-following-acquisitive-year?utm_source=newsletter&utm_medium=email&utm_campaign=Yorkshire_30th_Jan_2019_Daily

Hunters Property, the York-headquartered franchised sales and lettings agency business, has seen lettings revenue grow by 13% to £13m following an acquisitive year.

In a trading update for the year ending 31 December, Hunters Property reported that it increased network income by 1.4% to £39.4m (2017: £38.9m), with the average branch breaking through the £200,000 threshold.

You dont need to have a Phd in acccounting to see what might go wrong here ...

What a bunch of loons. Spending cash - or wrose, debt - on buying a falling knife.

 

 

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This creates more questions than it answers.

https://www.dailymail.co.uk/news/article-6648223/Estate-agent-stole-300-000-caught-boss-saw-kissing-cash-CCTV.html

Surely most rents would be collected electronically?

Surely youd notice a ~100k dip in cash pretty quickly.

Funny accounts too.

Lettigns agents normally operate from a cheap shop.

Seems to be a lot of asets/liabilities at play here. Especially as they are aroudn 300k which is the ammount he's alleged to have stolen.

Wierd.

 

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A couple of weeks I found myself in conversation with an Estate Agent and couldn't resist asking him  about the impact of the fees ban on his business. 

His take on it was a bit surprising. He said he welcomed it as the fees allowed "unscrupulous" agents to cut their fees to Landlords by milking tenants and prospective tenants (some make money out of charging prospective tenants £80 for a £3 credit check they know they will fail) . As the letting agency market is almost entirely price driven he was then forced to cut his fees to match and either lose money or engage in the same overcharging as the other agents.

He thought than Landlord fees will have to rise by  1 to 2% (of the rent)  to cover the loss of income. He also thought that it may lead to rents rising by more than this as tenants will find it easier to sign up to a higher rent without having to find a large upfront payment.  

 

 

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