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Shock warning that quarter of landlords considering stopping using agents

More than a third of landlords are looking to cut their annual spending - and many of them are considering ending their use of letting agents, according to the latest research by Kent Reliance.

The lender, part of OneSavings Bank, says the average landlord now spends £3,571 per property in annual running costs, before tax or mortgage interest – equivalent to 32.9 per cent of rental income. 

These costs have risen by 5.6 per cent in the last two years without factoring in increasing taxes. Since the start of 2009, costs have jumped by 28 per cent, a rise of £771.

Some £1,086 is currently spent on maintenance, repairs and servicing, and £935 spent on letting agent fees per property. 

A typical landlord spends £426 per property each year in ground rents and service charges. Insurance typically costs £149, and legal and accountancy fees £107, while administrative and license fees add another £64 per year.

A further £528 is lost in void periods each year, a figure that has climbed in recent years as a result of higher rents, and a slightly longer gap between tenancies.

Cumulatively across the private rental sector, landlords contribute a total of £16.1 billion to the British economy through their spending, supporting thousands of jobs from builders and tradesmen through to accountants and letting agents. 

This figure has nearly doubled from £8.5 billion a decade ago, following the long-term expansion of the rented sector and rising costs per property.

Property upkeep, maintenance and servicing spend represents landlords’ largest running cost across the sector, totalling £5.8 billion. Those that use a letting or management agent spend a collective £5.0 billion, the next largest outlay.

Investors spend a total of £567m on accountancy and legal fees, £341m on administration and registration costs, creating an additional £908m of spending solely dependent on the PRS’ existence. £2.3bn is spent on service charges and ground rents, £848m on utilities, £791m on insurance, and £618m on other associated costs of running a property.

However, the survey suggests that faced by rising costs, and higher tax bills following the recent changes to mortgage interest tax relief, landlords are set to reduce their spending or increase rents. 

Some 36 per cent of landlords, surveyed by BVA BDRC on behalf of Kent Reliance, are already reducing or planning to reduce their spending. 

Overall, a typical landlord reviewing their outlay would cut spending per property by around six per cent. If replicated across the private rental landscape, this would reduce their total spending by nearly £1 billion each year, reducing the revenues of the industries that depend on the sector.

Property upkeep and maintenance and property improvement were the two most popular areas identified by landlords for potential cost cutting. Others hope to cut their outlay on mortgage interest payments.

Letting agent fees were in the sights of a quarter of landlords; those that targeted spending here expect to trim their expenditure on agents’ fees by 30 per cent. “If landlords’ fees climb once the Tenant Fees Bill is introduced on 1 June 2019, we may see a greater number shop around, or consider self-managing their portfolio” says Kent Reliance.

Meanwhile, one in five landlords plan to increase rents to cover the higher costs they face.

“The political discourse around the private rented sector has been one-sided to say the least. Overlooked is the significant economic contribution landlords make, supporting thousands of jobs through their spending and housing a large portion of the country’s workforce. Instead, landlords have faced punitive tax and regulatory changes, at a time when running costs are climbing” explains Adrian Moloney, sales director of OneSavings Bank.

“Further intervention could prove counterproductive with many landlords still coming to terms with change. A heavy-handed version of rent control that prevents them from absorbing rising costs, for instance, could prove to be a tipping point leading to a dwindling supply of rental homes.”

  • Kristjan Byfield

    I always find surveys that undertake a relatively small survey pool (in this instance 494 people) and then extrapolate the figures nationally hard to swallow. There are an estimated 2m landlords in the UK so this is a 0.0247% survey pool. Half of all landlords do not use an agent already and, when faced with an array of costs of which few are 'optional' I suppose about the only cost that can look to be culled is a letting agent. But in the age of ever-increasing legislation is that at all viable for most landlords? I don't think so (but then that all depends on how effectively regs are enforced going forwards).

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    No Kristjan, Many Landlords choose to invest to upgrade their properties and keep them in good repair. With Increased financial pressures, less will be able to do this and to a lower standard.
    Nobody is realising who the end-losers are ( Tenants ) not even tenants themselves !
    Labour are as blind as the Govt to the wider implications for the very people they claim to represent..

     
  • icon

    How will that help drive up service and standards in PRS? Self managed LL tend to provide poorer service. Are less responsive. More reluctant to review rents. Few appreciate the amount of legislation they have to comply with. Good luck i say.

    Paul Barrett

    Absolute TWADDLE
    LA provide a far poorer service than self-managing LL.
    The only LL that need LA are those that live so far away from their properties that it would be impractical to self-manage.
    LA are a necessary evil for many LL due to geographic distance.
    Self-managing LL provide excellent service.
    LA are in for a shock when due to cost pressures most LL can manage perfectly well themselves.
    LA are on a loser.
    I DON'T remember many if any contributing towards the S24 Judicial Review.
    LA will have to accept a reduction in their client base and react by amalgamating with other LA.
    There are about 5 LA in my town.
    Totally unnecessary.
    Only one is needed.
    To remain viable LA need to increase numbers of property under management
    I predict lots of LA going out of business.
    Rarely do LL need a LA.
    All they really need to do is join a LL organisation who will greatly assist in all things required for self-management.
    The PRS is heading for a massive reduction and LA will also be affected.
    There will be declining business for all those involved in the PRS.
    Time to wakeup and smell the coffee.
    LL will be deserting LA even more now.
    They have little choice in the matter mainly caused by S24.
    LL need to aggressively dispense with those that aren't really required by most LL and who usually cost the most.
    LA are a luxury than can no longer be afforded.

     
  • S l
    • S l
    • 10 March 2019 10:58 AM

    someone should forward this article to the council and the MPs with big RED tag. how do we curb the abuse of power by the council using their position as council to levied such high level of charges . dont forget they get paid no matter what. prs dont. they caused huge losses in their attempt to provide and charge for housing. prs have to swallow their own losses. Yet the council continuously create huge revenue from council tax especially empty properties from 100-150 percent and hmo high charges and yet get huge amount from the government to deal with hmo.

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