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Landlords to shop around as annual agent fees hit £870 per property

Landlords are increasingly looking to reduce the fees they pay to letting agents due to industry tax changes and increasing management costs.

The typical landlord spends £870 on letting agent management fees per property, per year.

This equates to a total annual spend of around £4.7 billion, according to research by mortgage lender Kent Reliance.

A survey of over 650 landlords, carried out by BDRC Continental on behalf of Kent Reliance, found that 36% are already reducing or planning to reduce their spending.

One in five investors surveyed said they are looking to increase rents to combat rising costs.

Of those looking to cut spending, 10% said they would look to reduce money spent on letting agent fees. Joint with mortgage costs, this was the second most popular option for cost-cutting after property maintenance and upkeep.

Landlords looking to reduce their spend with letting agents anticipate being able to cut costs by up to 28%.

The report suggests that landlord cost-cutting could affect the jobs and industries that rely on private landlords for revenues.

Kent Reliance estimates that total planned cuts could reduce spending by more than £500 million per year.

It is reported that landlords currently contribute almost £16 billion per year to the British economy through pre-tax spending.

Thanks to the rapid growth of the private rented sector in recent years, this figure has more than doubled from the £7.1 billion recorded in 2007.

Landlords' largest outlay is on property upkeep maintenance and servicing, followed by letting agent fees, service charges and ground rent, other costs and then insurance.

The Kent Reliance study estimates that the average landlord spends £3,632 per year - before tax or mortgage interest - in running costs for each property they own.

It calculates that this equates to roughly a third of rental income and has increased by a quarter since the beginning of 2007.

Of the £3,362 average, £1,025 is spent on maintenance, repairs and servicing, £870 on agent fees, £374 on ground rents and service charges, £181 on insurance, £121 on legal and accountancy fees and £41 on administrative and license fees. 

It says that a further £652 is lost in void periods each year. 

“Landlords may seem like an easy target for political point scoring, but they play a vital role in the economy,” says John Eastgate, sales and marketing director of Kent Reliance’s parent company OneSavings Bank.

“Not only do they house a huge proportion of the country’s workforce, their spending supports thousands of jobs - whether builders, cleaners, lawyers and accountants or letting agents.”

He says that targeting landlords with ‘punitive taxes’ has unintended consequences.

“Either it means less work for all those who support the property industry, or it means tenants will have to foot the bill for the government's tax raid, or both.” 

Eastgate says that the combination of tax changes and rising running costs will encourage more amateur and accidental landlords to leave the market, increasing professionalisation of the sector.

“There is nothing wrong with having fewer, bigger landlords, but that alone will not help more young people get homes,” he says.

*Graham Norwood is on annual leave until May 18th. Conor Shilling will be undertaking editorial duties in his absence. Please send any enquiries to press@lettingagenttoday.co.uk

  • Simon shinerock

    Landlords will pay more not less to have their properties managed as many small operators exit, costs have to be covered and DIY is not a viable option for most

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    Average agent fees of £870?

    Figures distorted by London no doubt. Our landlords pay us an average of £486 per year including VAT and we probably save them more than that each year. Properties are advertised in a high street location as soon as they come on the market meaning void periods are virtually non existent. We also provide up to date advice on any new legislation ensuring landlords stay within the law. If we get a problem tenant we do all the paperwork at no cost other than the court fees. There is no need to pay thousands of pounds to people who don't know what they are doing like Paul Shamplina as DIY landlords appear to do judging by what we see on TV!

    If anything we should be charging more?

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    Same here. High street location, more knowledge than any group of them could amass in six lifetimes, an awful lot of 'going the extra mile' at no cost etc. Average is under £550 including VAT.

    I agree on the Paul Shamplina point, we handle all Court process in-house for the landlords, I am exceptionally well versed with all aspects of Money Claim and Accelerated Possession and regularly find myself screaming at the TV when Paul goes about a process in a bizarre fashion.

     
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