Landlords ‘will drop letting agents as costs rise’ – claim

Letting agent fees are the second biggest cost for buy-to-let landlords and could rise further if tenant charges are banned, research claims.

Research by lender Kent Reliance, looking at the costs of running a buy-to-let portfolio, found that landlords spend £4.7bn each year on agent fees at an average of £870 per property.

The figures were compiled based on desktop research of ‘mid-tier’ letting agent fees and goes towards the average £3,632 a year that landlords estimate they spend on running a buy-to-let property.

The highest running cost was property upkeep and maintenance at £1,025.

The report acknowledges that lettings charges for landlords could get higher if a tenant fee ban is introduced, stating: “If we do see tenant fees prohibited, and as planned following the Government’s consultation, we may see landlords’ costs rise further, as letting agents seek to recoup lost revenues.

“No doubt many landlords will try to absorb these costs or pass them on to their tenants in the form of rent increases, but there is likely to be a lag before they can be fully recouped.”

The prospect of increased costs as well as rising Stamp Duty and the end of mortgage interest relief means 36% of landlords are looking at making cuts, the report warns.

Property upkeep and maintenance was the most popular area identified by 17% of landlords, followed by letting agent fees and mortgage costs among 10%.

Taking the 5.3m properties in the rental sector and the running, purchasing and mortgage costs, the report estimates that overall, landlords currently contribute £15.9bn per year to the British economy through pre-tax spending on running their portfolios, supporting thousands of jobs.

John Eastgate, sales and marketing director of OneSavings Bank, parent company of Kent Reliance, said: “Landlords may seem like an easy target for political point scoring, but they play a vital role in the economy.

“Not only do they house a huge proportion of the country’s workforce, bridging the housing demand and supply gap, their spending supports thousands of jobs – whether builders, cleaners, lawyers and accountants or letting agents.

“Trying to tackle the housing crisis by targeting landlords with punitive taxes is very simple and politically highly palatable, but has unintended consequences. Either it means less work for all those who support the property industry, or it means tenants will have to foot the bill for the Government’s tax raid, or both.

“One side effect of the recent changes, and rising running costs, will be the professionalisation of the sector as amateur and accidental landlords leave the market. There is nothing wrong with having fewer, bigger landlords, but that alone will not help more young people get homes.”

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6 Comments

  1. danny

    I’m not sure I can agree with this , saying that landlords bridge the housing supply and demand gap is like arguing that they have magic houses that otherwise don’t exist. By allowing hem tax relief on mortgages they have an advantage over FTB’s and over the last 5 years where gobbling up stock by just paying more than the young couple could afford …. who would then become their tenant

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    1. JMK

      ‘Bridging the housing supply and demand gap’ I think means that they provide homes to those that cannot afford to buy, that being the case the statement is correct.  Danny you say that landlords are guilty of ‘gobbling up stock’ yet this is clearly untrue as proved by the London School of Economics.  And landlords actually, on average pay less than OOs for property.  
      You also ignore the hugely positve effects that landlords have had on supply with conversion of under-utilised (inefficient) houses into HMOs, bedsits and flats and also the conversion of commercial buildings into residential.  Many new homes are only built because landlords have put deposits down ‘off-plan’ and given the developers interest-free loans by doing so.  Some builders are now reporting that a significant proportion of their market has disappeared as LLs are not buying.  With less demand they will build fewer houses.
      An enormous number of long-term empty houses have been brought back into use by landlords that have sought them out and lavished cash on them.  I have done this many times myself.  I so often hear the argument that a FTB could have done this but these places have in some cases been empty for years.  FTBs apparently had no interest, or the places weren’t suitable because they were too large, or it would have cost too much to do, or they simply couldn’t have got a mortgage on the wrecks.  There is a property very near me that has been empty for at least 20 years and it would cost a fortune to renovate and bring back into use, most likely as flats.  I’ve had my eye on it for some time but I won’t touch it with these attacks from Government.  They need to realise that LLs are part of the solution and not the problem.  If we hadn’t done all the things I’ve just mentioned then the issue would be much greater.  Just imagine for example the surge in demand for starter homes if suddenly all HMOs disappeared.

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  2. jeremy1960

    That will be interesting! I did a legal update last week for private landlords who self-manage and in a room of about 50 only 2 had any knowledge of right to rent, none had any knowledge of latest electrical regulations and none knew anything about issuing how to rent guide. If this happens I hope the courts and local authorities can cope with increased workload as tenants become more savvy and test landlords who have made mistakes by not being up to speed.

    Very interesting article yesterday by Kate Faulkner ow.ly/GYul30bCQRx   well worth a read, if only someone in government were to have such a pragmatic approach!

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  3. proper21

    “IF we do see tenant fees prohibited” ??????? Get real.

    Any agent who thinks they can pass on the cost to their landlords are dreaming.  Get innovative and yes, rents are going up and agents will need to get more systems in place to manage the fallout….

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    1. Beano

      If ever a post lacked any substance this is it Proper21, perhaps you could start the ball rolling with some innovation suggestions?

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  4. Woodentop

    “Landlords will drop letting agents” ……… They said the same about estate agency and on-liners. Landlords that go to agents do it because they either don’t know what they are doing in a legal minefield or the hassle of looking after their properties, particularly when things go pear shaped. Just like car insurance, never had an accident so what a waste of money, until someone bumps into you!

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