What’s the outlook for Letting Agents in the UK, in 2018 and beyond…?

by | Jan 8, 2018 | Community, Strategy | 0 comments

The world of lettings, has in the main for 3 decades, not changed much… We still work for landlords helping them find tenants, either via a let only or fully managed service, collecting the rent and forwarding onto landlords and dealing with the tenancy obligations and any maintenance throughout the tenancy…

That was until NOW

Over the last few years, the industry that I have worked in since 1990, is undergoing, the most major overhaul and evolution, I have ever seen, with changes coming from every direction, due to market forces, supply and demand, the corporate structure, works force needs, consumer voices and legislation, not to mention the Proptech industry

So right now in a market where there appears to be twice as many agents as there ever was and half as many properties available to get on our books, it’s fair to say the competition is fierce and for many, this is the toughest market they have ever seen.

So what are the BIG changes?

Firstly legislation, its piling on us from every direction, the De Regulation Act, changing all the rules in relation to how what is required on a move in, the Immigration Act, becoming CRIMINAL for breaching this act, GDPR coming this year, plus changes to HMO regulation and licensing rules, in Wales, Rent Smart Wales requiring Every agent to be licensed at huge costs, and every member of staff qualified, plus major legal changes in Scotland with The Private Housing (Tenancies) (ScotlandAct 2016, which has completely re-written the law in relation to tenancies as they know it and removed the ability to serve notice on tenants using a section 33 (section 21 equivalent in Scotland) and many regional councils also making it harder by implementing blanket Licensing, and introducing ARTICLE 4 not to mention the continuous on going challenges and in some cases chaos bought about by benefit cap or Universal Credit.

On top of this, we have the government deciding to BAN tenant Fees, Phillip Hammond announced this in November 2016 and their draft bill was released in November 2017, meaning, that even though each letting agent has to do more than double what they used to do 15 years ago, their options for charging have now decreased, with many agents reporting they stand to lose up to 25% of their turnover with the tenant fee ban… This has resulted in a complete shake up of the industry as we know it, many agents are completely restructuring their fees and charging points, completely looking at how they run their business, many outsourcing certain functions so that they can reduce staffing levels, and some just getting out, which I believe means that in a couple of years, agents across the UK, will all start to look very different, as they have all evolved into different styles with different fee structures and services, as opposed to all being similar, which will make the market more interesting for sure…

Then we have the rise of the Call Centre Agents… apparently they now have around 5% of the market and have therefore seen big successes in the sales market, not quite so good results in the lettings market, I believe this is due to the complexity of property management, not being suited to call centre operatives, so it will be interesting to see how this evolves, but many agents have stood their ground on fees, because they know to deliver the same high level and personal service, this cannot be done on such low fees, but others have tried to compete. The immediate effects seen of this emerging competitor to the traditional agent is a loss of listing staff from the high street agents as they get attracted to working for themselves from home, with only targets on winning instructions to focus on, but already we have seen many of this miss the comerardery of working in a team, in an office and amongst friends, so again we will have to see the effects of this on the market moving forward.

Then we have the confusion around Proptech… Everywhere agents turn, there is some new GIG company that has created a “gadget” or a piece of software, that will apparently “make our life easier” or perform our job for us in some way, and some of them are amazing, and really do make the process a lot smoother, and I for one welcome the investment into our marketplace right now, because we need all the help we can get, so it certainly comes at the right time… The problem is, that there is so many of these companies springing up everywhere, it’s hard to identify WHICH ones to look at, which ones really make the mark and WILL save us money and time, and then finding the time to actually investigate them and look at them fully (and risk spending the money on them)

Finally, we have Landlord Taxation or Clause 24 and stamp duty changes, plus foreign purchaser taxation… Now this may not be a challenge to Letting Agents directly, but it heavily effects our end user, our landlords, and again therefore effects our market share and ability to make money, the taxation has driven many landlords to look at more profitable ways to let their property and have jumped into serviced accommodation or Airbnb type rentals, which has sucked the private rented accommodation out of many areas, much to the dismay of many councils, who some have tried to stop, some landlords have decided to get out of the market completely and sell up, and many southern investors, have now decided to buy up North where the returns are better, but the market is very different…

So what’s the outlook?

I believe that we have more challenges to come as the consumer and governments look to further change the PRS to be in their mind “fit for purpose” as we become one of the dominant housing sectors, now that council type housing is on the decline and home ownership for the first time in decades.

We may be looking at longer term tenancies, the removal of our section 21, licensing for landlords and agents and probably a complete overhaul of our tenancy laws to make them simpler, as they have done in Scotland, possible rent increase caps… who knows…

Either way, my thoughts are the next few years are going to be interesting, as agents we will have to work harder for our money, get more clarity out there as to what we do for our fee, and get better at defining our services, it’s not going to be easy, and certainly NOT for the feint hearted I wholeheartedly believe that for those that stick around, the future will be highly lucrative…

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