CHANCELLOR WAS RIGHT TO BAN LETTING AGENCY TENANT FEES AND SHOULD IGNORE THE INDUSTRY CARPING
Interesting headline (above) and article (below) from Simon Watkins of This is Money. Whilst I don’t entirely agree with him there is genuine merit in many of his points. Our comment is at the bottom, so please read on.
Philip Hammond delivered an Autumn Statement without gimmicks. That alone merits three cheers. Ill-thought through policies aimed at grabbing a headline became too common under his predecessor.
But that does not mean it was a statement without controversy. One such was the decision to ban letting agents from charging tenants fees.
Shares in estate agents slumped. Cue carping from the industry.
Hammond should (and I have no doubt will) ignore them. While there was at least one other policy announcement which was wrong (of which more later) on agents’ fees he is quite correct and remarkably in tune with the real concerns of a significant part of the population.
Critics argue that insisting the fees are charged to landlords will not actually save tenants any money but will simply mean the cost – the fees average about £340 a year – is passed on in higher rents.
This is not necessarily the case and, if investors really think the fees will continue to be collected at their current rate, why did shares in estate agents fall so sharply?
In fact the market, rightly in my view, concluded that when all is said and done this policy will eventually curtail the amount of money estate agents will make.
But even if such fees are passed on in higher rents, the policy is still the right one. For a start, it will spur competition among estate agents.
Landlords will be more keen to shop around for lower fees if they themselves have to take them into account, rather than being able to assume it is an issue for the tenant, and even if these fees are recycled into rents it will bring greater transparency into the cost of renting. Tenants will be able to compare rents more directly.
I suspect most do not consider the estate agent fees when looking for a home and only come to realise their effect on their outgoings later in the process.
As we report this week, estate agents’ fees are not even included in official measures of inflation, which means this aspect of the cost of living for a growing proportion of the population has been hidden from view.
More transparency in the cost of renting and a little more competition between estate agents are both to be welcomed, particularly now that the private rented sector has become so large and shows little sign of shrinking.
BASTION ESTATES COMMENT: This is my twentieth year in property and ten of those were in estate agency at branch level to operations director level so my knowledge of the lettings market is relatively well informed though I admit it has never been my area of specialism. However, the fees some letting agents charge tenants for a large variety of services is close to disgraceful. Yes any business has to quantify a member of staffs time in dealing with the paperwork and referencing but the true actual cost beyond the man hours is very minimal. It is a highly profitable section of the property market and one many have taken advantage of. I am still amazed as I always have been, by the ludicrous charges and the ‘any excuse to charge more’ type attitude. There had to be point where someone took action and here it is! How it will actually happen and when and what effect it will have on some letting agents we will have to wait and see, but if it removes some letting agents from the market and makes the other letting agents more competitive and realistic, I welcome the changes.