Four in ten letting agents thought of giving up as fees ban threatened income and profits

Four in ten letting agents have considered ceasing trading over the past year amid falling profitability.

One in five agents lost 20% or more of their revenue as a result of this year’s fees ban, and only 2% saw no loss in revenue at all.

To counteract the loss of revenue, 80% of agents raised landlord fees and 60% introduced new revenue streams, while the same proportion cut costs.

The new annual Fixflo Lettings Report, based on responses from 443 agents and 223 landlords, also found evidence that the industry is coming to terms with the effects of the ban.

While 39% of agents said they had thought about quitting, this was actually down from the 42% who contemplated it the year before – ahead of the ban.

The current issue of most concern is landlords quitting or reducing their stake in the sector.

Over a quarter (27%) of landlords are planning to sell at least some of their rental properties.

The phased abolition of tax relief on mortgage interest is cited as one concern, and the impending abolition of Section 21 is another.

Responses from letting agents showed their concerns, with almost three-quarters reporting that “landlords selling their properties” was the main reason they lose clients.

Almost all landlords (89%) said they had found owning and letting properties harder over the past year.

Fixflo has also released a new report on the leasehold and block management market.

It surveyed 207 individuals representing 170 leasehold and block management companies and 37 industry suppliers.

The report found low profit margins in firms with over £500,000 turnover, and average deficits of 12.5% in those with lower turnovers.

The report also found demanding workloads, with companies typically growing their businesses but not their profits.

In almost half of firms, one property manager looks after fewer than 20 buildings, but about a quarter of firms have at least 30 buildings under one property manager, and 7% have each property manager looking after 50 buildings or more.

The report identifies build to rent as a “£2.6bn missed opportunity” for the sector, saying that 70% of block management companies have not expanded into build to rent.

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12 Comments

  1. KevopLets

    No surprises in these reports – it’s been a tough year for all lettings businesses.

    Properties per property manager is an interesting ratio. We run at about 30 per property manager and I couldn’t imagine us getting below that because it’s not financially viable.

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  2. J1

    Per residential house might be different

    100 houses per manager is about right if not 125 if they are low maintenance

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    1. Woodentop

      Over 50 and you are not able to service your landlords correctly.

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      1. DASH94

        That’s a bit of a sweeping statement.    It depends on how you’re set up.  Rather than assign properties to individuals for full care, we split the functions – maintenance manager, viewings/checkouts/man visits and applications and contracts are all separate roles.  I have around 400 properties managed very well by 4 staff.   Holiday season is a bit stressful, but I don’t believe that service suffers and we still have capacity.

        If you’ve a high rate of churn for properties that can make things difficult, but I’d have to take on much more than 50 properties to add a staff member

         

         

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        1. Woodentop

          Correct depending on how your operations work and the service you provide. But it doesn’t matter if you have 1 or 10 members of staff. Each property has a workload that has a set minimum time management. The better your IT systems are, the easier it is to manage but IT does not do the “hands on work” involved. The more problems you have with, landlord, tenants, property and compliance, up goes the workload. Not necessary to start to delve into all things that involved in lettings management but on my rounds to agents offices it never ceases to amaze me how little they really do at managing …. more fire fighting and admin, double the workload forced upon them by government and regulators. You can never catch up on lost time and I wonder how many of our readers are lettings agents who wish they could afford to employ more staff to cope, but the fees structure today prevents and they put to one side jobs they wish they could do or even should do, but haven’t the time. You are correct 50 more properties will not pay the employment bills. The first to go in management is inspections and yet this is often what can save you time later on.  I see many two people letting agents who struggle and those that are in an estate agents branch often call upon the others to help out.

           

          Wait till licensing is mandatory and you get an audit. Then you will know if you are doing “the service” you thought you were?

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  3. smile please

    The positive here is many are still trading and prospering.

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  4. RosBeck73

    What I have found both weird and disappointing is that letting agents did not help landlords at all for a long time after Section 24 was introduced. Many of us tried to get them to join with us and they wouldn’t even circulate the petition we organised against it. (The RLA and NLA also wouldn’t even do it, which was even weirder). It was though as though letting agents thought an attack on landlords had nothing to do with them.

    Similarly, someone I know who manages a letting agency tries to have a spat with me every time I post something on FB about how terrible a Marxist Government would be for landlords. This is axiomatic. However, he seems to think that electing a party which would destroy the livelihoods of landlords has nothing to do with him and his job…

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  5. Woodentop

    Agency fees are not keeping pace with inflation. Landlords expect everything on the cheap and tenants cannot afford rent increases. Something is going to go BANG.

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    1. DASH94

      Why should landlords have to swallow costs due to inflation?  Rents should rise with inflation and inline with wage increases, and the fees then take care of themselves.   Re-instating tax relief on mortgages would make a huge difference to whether a landlord can make money or not – and relieve the pressure on costs.  I don’t think they want things on the cheap – they just want it not to cost them money to rent their houses out.  It’s in all of our interest to help them do that – tenants included.  Less landlords means less stock, which means greater demand and higher rents.

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      1. Woodentop

        Interesting comments. Rents should rise with inflation but are they or can they or will they? Far to many tenants in PRS shouldn’t be and cannot afford as it is. Less landlords (forecast) = less stock = greater demand.  
         
        Higher rents only if they can afford them.  
         
        Labour announced Higher rents are to be capped.  
         
        Landlords are being squeezed between income and expenditure to the extent many are quitting as it just isn’t worth (a) the hassell they see (b) once badly burnt by rougue tenants (c) labour want to give the tenant RTB (d) Income they can get in the pocket realy worth it to them, is the dilema that maybe getting closer than many realise.

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  6. Property Poke In The Eye

    I wonder how some agents actually make any money at all in our area.  Low stock and over priced.

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    1. Woodentop

      Low stock has the knock on effect of similar to fixed income. Lettings is not a high earner in comparison to sales but the over heads are very similar. It should be no surprise that the lead story is indicating 40% of agents are considering giving up. Where is the money to come from? I have argued for a very long time that all the regulations and workload forced onto lettings agents, some of which is not their responsibility but an easy option for free work for government departments, at agents costs is going to catch up. Very little thought by pressure groups and government in what they are actually doing and the consequences for all in PRS, including tenants. We are expecting worse to come!

       

      Who will be able to pick the pieces up? Another agent? Think again, all that will do is side step the reality of workload, expenditure and income are at opposite ends of a big void. Letting Agents need to be freed of responsibilities that are not their workload and Government needs to reverse its direction, particularly on all subjects that does not encourage landlords. They need us, but hell bent on destroying PRS through little thought process. What Osborne and the Conservatives have done is nothing compared to what Labour say they will do.

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