This year’s Autumn Statement was Philip Hammond’s first as chancellor. Before he stood up to speak to the House of Commons on Wednesday he sent out the following tweet:
As expected, one of the major focal points in the statement was on the property market and some of the rules surrounding it. So what did he say?
If you missed it, Hammond had a number of promises relating to property. These include more funding for affordable housing by providing £2.3bn for houses in areas of high demand. Moreover, another £1.4bn will be allocated for more affordable homes.
Letting Agents Fees
Despite warnings in September from the government’s housing minister that “landlords would pass costs to tenants via rent”, Mr Hammond has banned letting agent fees.
Mr Hammond stated that “we have seen these fees spiral, often to hundreds of pounds. This is wrong. Landlords appoint letting agents and landlords should meet their fees”.
On Wednesday, after the details of the plan were reported, letting agency shares fell sharply. Foxtons dropped down by 10.6 per cent, at 110p per share, while Countrywide shares were down as much as 5.5 per cent, but managed to recover by only 3.5 per cent. LSL Property, one of the main owners of estate agencies across the UK, dropped by 5 per cent, with only 207p per share.
In the past letting agencies were able to charge both landlords and tenants for administrative services such as checking references, preparing tenancy agreements, renewing a tenancy and ending a contract. After the decision, the agencies will need to cover the charges themselves or transfer them to the landlords.
Consumer and tenant groups have welcomed the news, after repeatedly attacking the charges in the past. According to Gillian Guy, chief executive of Citizens Advice, “people are paying over £300 to letting agents for what is often basic administration, such as checking references and running credit checks. This change will help the 4.8m households who now rent from a private landlord – 1.5m of whom are families with children.”
On the other hand Richard Lambert, the National Landlords Associations’ (NLA) chief exec, stated that, “adding to landlords’ costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents”.
It is no surprise then that this has led to mixed responses from landlord groups and the NLA. Clearly there needs to be greater transparency around fees, but it is unfair to penalise letting agents.
The ban will also likely hurt estate agency businesses that have been looking to expand their letting division, in the face of the number of homes being bought and sold across the country remaining low.
This could have a negative effect on the rental market and is yet another attack on the industry. However, despite the extra cash for new houses, many properties are still too expensive for people to buy; many are unable to raise the money for their deposits or pay the taxes. This means that people will still need to rent properties, and you can see from my previous articles, that the rental market is still buoyant.
There is also no good news for landlords. There was no change to the legislation that will remove mortgage interest as a legitimate business expense from private landlords over the next four tax years.
And, as mentioned above, there is concern that landlords will have to foot the bill. However, landlords can decide who they want to use and can shop around for the best fees.
So you may be thinking that it is all doom and gloom! Despite all of what’s been mentioned today, it still pays to be a landlord, especially a landlord of an HMO. People will always need somewhere to live, and mortgages will always be out of reach of many – this is where we can help. The investment for new homes is still not enough to solve the housing crisis.
The changes will also clearly impact on letting agent profits. But for the same reasons mentioned above, the rental market is still growing and should offset some of the loss of fees.
I’m always happy to hear from you, whether you want advice on a rental or need a property sourced – don’t hesitate to get in touch. My email is email@example.com and you can ring me on 07944 726 676.