In yesterday’s Autumn Statement, Philip Hammond made a shock announcement – stating that letting agents would no longer be able to charge fees to tenants. Here’s a closer look at the ban, and what it means for landlords in the UK.
Tenant Fees – The Current Situation
At present, letting agents are legally able to charge tenants a range of fees for their services, such as administration, credit and reference check costs. Since last year, letting agents have been legally required to declare their fees, and are obligated to be transparent about any ‘hidden charges’.
However, under the new law, they won’t be able to charge tenants any fees at all – which means the costs are being shifted firmly to landlords instead.
Why Has This Decision Been Made?
Hammond highlighted the difficulties tenants face, particularly in parts of the country like London, to find affordable rented accommodation. According to figures released by the English Housing Survey, the average UK tenant spends half their income on rent. In London, this can rise as high as 72%. When letting agent fees are added to rental charges, this can be prohibitively expensive.
They also found that the average renter pays £223 in letting agent fees, with some tenants paying as much as £500. The charity Shelter revealed that renters currently pay over £1000 in total (upfront rent and fees) to secure a place to live; with London tenants paying double this.
The Effect on Landlords?
Philip Hammond claimed that moving the costs to landlords would save renters £4.3 million. Understandably, UK property investors aren’t happy about the move; especially given the earlier announcement this year that Stamp Duty tax would be raised by 3%.
David Cox, managing director of Arla, stated that the decision was a ‘draconian measure’. He continued: “It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder. This decision is a crowd-pleaser, which will not help renters in the long-term.”
Passing the Costs on to Tenants
The likelihood is that landlords will simply pass the additional costs to tenants by elevating rental rates – which leaves many wondering whether the move will actually support the rental market in any way.
Additionally, landlords are more likely to shop around for better deals with letting agents, which will make the industry far more competitive.
Should You Invest in Property in the UK?
Ultimately, the decision is unlikely to affect your UK property investment by a significant margin. Demand for rented accommodation is still high, and when spread across the year, the additional costs are fairly minimal.
It’s certainly another blow for landlords in the UK – but it’s important to remember that if you invest in the right area, at the right price, there’s still a healthy ROI to be made.
The Buy2Let Shop Limited
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If you’d like to find out more about our range of services, which include assistance with buying a house at auction, simply visit The Buy2Let Shop website today.