The peak month for the rental industry is usually July. Not this year. When the tenants’ fee ban came into force on June 1st, there was a huge spike in demand immediately after with some agents reporting up two or three times the usual activity levels. Coming amidst already low stock levels, it resulted in a highly competitive market with some tenants having to pay over the asking price to secure a property.
Rightmove’s Miles Shipside says:
‘A spike in tenants looking for a new place to live indicates some unsurprisingly held out until fees to start a new tenancy were removed by the government at the start of June. The ongoing shortage of quality stock could end up being exacerbated further by landlords whose tenants are now giving notice so they can move on without paying fees, and some of those landlords then choosing to sell up rather than let it out again.’
In other news, as the various political parties gear up for an election, John McDonnell has suggested Labour might hand tenants the right to buy their houses, possibly at a discounted rate. There has, unsurprisingly, been a huge backlash, with many pointing out it would simply result in huge numbers of landlords withdrawing from the market and soaring rents. However, if Labour simultaneously brought in rent controls, as they have threatened to do, the rental market would be likely to go into total meltdown.
On the subject of legislation, as many had predicted, the tenants’ fees ban and rising tax bills, have meant landlords are increasing rents in order to cover the shortfalls. According to ARLA Propertymark (Association of Residential Letting Agents) 64% of their member agents are reporting rent rises. In the most affected areas, Yorkshire and Humberside and the West Midlands, it was as high as 80%. To put that into some sort of perspective, last year, the average August figure was 40% and in 2017 it was 35%. Nor is it a one-off - this is the fourth month in a row that rents have been at record highs and, in July for example, 63% of agents reported rises.
David Cox, Chief Executive of ARLA Propertymark, said:
“Unfortunately, the impact of the Tenant Fees Act will continue to be felt by tenants, as in order to keep their heads above water, landlords will need to continue increasing rents to cover the additional costs they now have to bear.”
At the same time, stock levels have risen, with the average letting agent now managing 197 properties/branch, a rise of 4% since July. However, with demand rising by more than 4%, it is not enough to keep a lid on rents.