Rents in Scotland appear to have risen sharply following the ban on fees charged to tenants.
The rise also follows Shelter’s campaign encouraging tenants to reclaim their fees, and the implementation of tenancy deposit protection, requiring agents to physically hand over both current and ongoing deposits to a banking scheme.
According to the website Citylets, which has tracked rents for over five years, it is the start of a new era for the rental sector in Scotland. The latest rent rises it has reported are the highest it has seen.
It has found that rents have gone up across the country, but particularly in the cities of Edinburgh and Aberdeen.
Figures from the firm’s latest quarterly report show the average price of renting in Scotland has risen to £671, an increase of 2.3%.
Dan Cookson, senior analyst at Citylets, said the rise could be partly as a result of the abolition of tenant fees and other important changes made during 2012.
While many property commentators have predicted the changes would have an inflationary impact, the Citylets report is the first that seems to provide concrete evidence.
Cookson added: “Our report for the last quarter of 2012 is significant in that it is the first to cover a period after the changes in the sector in 2012 took hold.
“Two cities which have seen some of the biggest rises in rents – Edinburgh (up 5.1%) and Aberdeen (up 6.3%) – both experienced larger than inflation rises in average rents across all types of properties.
“There is certainly a suspicion that the recent banning of agent fees to tenants has had an upward impact on rents. Several agent clients have suggested this to be the case and our data seems to support this view.”
Alistair J McMurdo, director of Castlebrae Sales and Letting, said: “Given the recent change in legislation relating to the charging of tenant fees, many landlords are trying not to increase rents.
“However, we are finding that due to the increased costs being passed to landlords, rent rises are inevitable.”
The Citylets report reveals that Aberdeen is the most expensive place to rent in the country with the average rent in the Granite City coming in at £950.
Meanwhile in Edinburgh, prices rose to an average of £819.
Glasgow’s average rent increased by 2.2% and now stands at £612.
For more, follow the first link. And if you want some idea of how the ‘excellent’ (to quote the Guardian) Shelter campaign is picking up in England, go to the second link.
www.Citylets.co.uk/q4-2012-
http://www.guardian.co.uk/commentisfree/2013/jan/16/tenants-protection-feral-letting-agents
Comments
Dan.
I did not post anonymous as I published my name. But if you post to the anonymous then the anonymous may speak.
Rather aggressive response to being challenged. Im merely pointing out that uk rents are rising at similar, if not higher rates and it is far too early to be categorical about the tenant fee issue to blame.
A difference of opinion, no need to be having it out on your premesis.
@Iain
perhaps you could read the analysis upon which the LAT article was based? it's clear it refers to the urban hotsposts of edinburgh and aberdeen & it's clear also that the rises seen are the largest on our records.
i find the suggestion of political motivation ironic when people like you post anonymously on this forum. we analyse data and report our findings.
supply / demand always a factor of course but we stand by our view that an upping of rents in response to fee bans was a factor. in these fast moving markets, boundaries have been tested. with many agents also telling us direct this was the case, it would be wholly ilogical not to suggest this was not a factor.
as regards this english figure of 3.4%.....poor show to suggest this is a factor to our undermine findings. we are stating that regional hotspots have experienced a jump well above recent quarters. rents could rocket 20% in England overall and this would not affect our findings. we also refer to the Scottish national figure in our analysis.
if you'd like a discussion, please do come in to the office.
@citylets
English rents increased 3.4% and still charge fees?
Really poor show from Citylets here. Trying to join the bandwagon just to coin favour with us.
@NeilJ I love your style. Calling the tenant fee a referencing fee did not make it legal. The legislation is not new, so why make any changes at all. If it was legal when you made the charge it is legal now! I hope that you are not a letting agent. #clueless
@bizzare Prior to the new legislation referencing fees were not considered by the Industry and the advice of our legal agents to be a premium and therefore a legitimate charge. This has now changed and our procedures have been amended.
I can confirm I am both an Agent and a Landlord but getting very tired of Agents, in the biggest boom the Industry has known, making out we are all...including our Landlords.....on a sinking ship!!
@neilJ
what company do you work for. i'd like to know so that i don't accidentially instruct you at any time in the future.
after declaring yourself as a hiterto charger of fees, which you adjudged modest and therefore ok because it's you charging them and not someone else, you then bang on about the shameful illegality of those who charged such fees....which was just about eveyone.
have you refunded your illegal fees to your tenants for the last 5 years to alleviate concience?
you seem very anti-landlord to me. this statement makes me wonder whether you run a letting agency at all.
"Landlords also forget that we are enjoying long term unprecedented low interest rates, have these huge savings been passed onto their tenants?"
of course they haven't.
Where would the double charging come into play?
For the record, I made a cost price increase in my landlord charges as the cost of providing the service has risen.
Well at least the tenants now know exactly how much they will be charged.
No more hidden fees and double charging to both landlord and tenant.
Neil, totally agree with you on the rhetoric statement.
The data proves nothing new and has been translated into spin that will be used for citylets and no doubt the RG
Supplier applauding it.
@Paul You have missed my points here. If I think a Landlord is over optimistic about his rent I don't take on the instruction therefore I am not doing him a disservice. I have had my figures burnt too many times.
Until the change in legislation we charged tenants £25 each for reference no charge for guarantors. No other charges were made but we still require to administer all the processes you described. Our business is run in the same manner as yours but with no fees to tenants.
We make a living out of it the same as many other firms in Scotland, even without enjoying the higher average rents English Landlords receive.
Today's discussion was focusing around Citylets trying to link the increase in rents in Scotland directly to the changes in fees charged. In my opinion they are stirring up some rhetoric to give the Agents, who were illegally charging their tenants, some excuse to go back to their Landlords cap in hand with their begging bowl to put up their fees.
@NeilJ: I would say if you are an agent and refuse to market a property at what you consider an 'above market value' asking rent then you are potentially doing your client a disservice. By all means advise them that it's ambitious, but since you don't know what the market value truly is until and unless it lets you could be adversely impacting the Landlord's income.
OK so a reference costs £10 net. How about the time taken in admin, chasing the tenant for information for that reference, organising the paperwork etc. How about the cost in time and money of protecting a deposit? Is an agent not to be permitted to charge out his/her time? Even on 'finders fees' or the like - in some areas these are an established aspect of lettings i.e. all agents in that area charge them. Whether you think that's fair or not is another matter. How about the costs incurred in sometimes very prolonged deposit protection related issues around agreeing damages after a checkout? Costs associated with deposit protection in England cannot by law be charged to the tenant - but the landlord gets no benefit from the imposition of the legal requirement to protect the deposit. These things all take someone's time and therefore cost money. Vexatious tenants can raise a dispute on entirely spurious grounds at no cost to themselves but which will take hours or days of work over a long period to resolve At the moment the 'finders fee' goes some way to paying for the otherwise unpaid work resolving deposit disputes etc. Agents are businesses as you should be aware - not charities. I work, therefore I charge a fee and get paid for doing that work. If the charging model needs to change then it will change, but ultimately the costs aren't going to go away.
As far as the long term low interest rates thing is concerned, I can only speak for myself and my business partners when I say that actually yes, we have passed on some of that benefit. For example, one couple in one of our properties have been living there for nearly 8 years and have not had a rent increase in that time on the basis that they're good tenants, the rent arrives in the bank account every month without fail and covers the cost with a sensible profit margin and we don't want to rock the boat. If interest rates went up or costs increased we would have to look at that position because we would be stupid not to. It's an investment, not an act of charity. I don't think that really qualifies as greed, do you?
@Dan. I am not challenging the actual statistics but disputing the apparent linking of the increases directly to the changes in Fees. It is my rents you use for your statistics and I have not seen any increase based on these fees.
@Paul if a Landlord required rents in excess of market value I would not waste my resources chasing a rainbow
If you think charging a tenant £100 each for a reference which costs net £10 and a non refundable £200 per tenant sign on fee which goes to the Agent and no one else is not greed then I have missed something along the line.
Landlords also forget that we are enjoying long term unprecedented low interest rates, have these huge savings been passed onto their tenants?
Dan.
Nothing in these figures to suggest an absolute step change due to fee abolishment.
You appear to have now narrowed down a Scottish issue to an Edinburgh and Aberdeen one. So are you implying that its agents there that are passing costs to tenants as opposed to the rest of the country?
Let's wait and see what the numbers are in the next couple of quarters before anybody can start the "I'm first miss" stuff...
Andy, your backtrack is appriciated though I doubt its sincere
I don't think is has been determined definitively whether fees charged between 1988 and Nov 2012 were illegal.
I think that this will only become apparent after the courts become involved.
In case anyone is interested below is a transcript of the debate in parliament and as they will see at no point is there any mention to referencing fees.
DETERMINING A RENT BY RENT ASSESSMENT COMMITTEEHC Deb 29 March 1988 vol 130 cc964-78
Lord James Douglas-Hamilton
New clause 6 seeks to prohibit premiums on short assured tenancies. The arguments in favour of prohibiting premiums on assured tenancies have been fully expounded in Committee and I accept that there is no place for premiums in the present tenancy regime. If landords had been allowed to charge premiums for granting protected tenancies, that would have been used as a device for effectively avoiding the system of rent control.
That argument does not apply to the new regime, because landlords who grant assured tenancies will not be subject to any statutory rent control and will be able to charge a market rent. So landlords will have no incentive to charge a premium. Indeed, any landlord who did attempt to charge one would probably not succeed in letting his property. I expect that some landlords will want to charge a moderate deposit on letting; that practice is fair enough.
I said during the Standing Committee's consideration of a similar proposal that the Government would give particular thought to the case for prohibiting premiums on short assured tenancies. It is true that there will be a form of rent control for short assured tenancies, in that anyone with this type of tenancy will be able to seek a determination of rent from the rent assessment committee at any time during the tenancy. However, as the rent assessment committee will make its determinations on the basis of market rents, we believe, on reflection, that landlords will have no greater incentive to charge premiums for this type of tenancy than for assured tenancies. Our current view, therefore, is that there is no need to prohibit premiums under the new regime.
§ Mr. Home Robertson
The Minister is an innocent abroad. He is suggesting that there would be no incentive 975 for landlords to try to secure premiums—key money—to enable a tenant to take up a tenancy. There will be considerable incentives to do so because they will be able to get away with it. Given that there is a severe shortage of housing to let in Scotland and that there will be fierce competition to take up tenancies whenever they occur, it will be all too easy for landlords to abuse the system in this way.
It is appalling that the Government are not prepared to take any steps to outlaw this sort of abuse. The Minister implicitly acknowledged that it was an abuse, but he is not prepared to do anything about it. He chides us on the grounds that we are hostile to his proposed redevelopment of the private rented sector, but he is wrong to do so. The Opposition would be happy about any development of the rented sector in Scotland that would meet the need, but the difference between the Minister and us is that we are not prepared to accept that tenants should have to pay any price for that development in the private rented sector.
We have already established that there is a severe shortage of housing to let in Scotland. We know that there are many desperate people who would be prepared to make serious sacrifices, which they probably cannot really afford, to secure homes for their families. They are likely to be prepared to pay premiums under these desperate circumstances and may be prepared to offer inflated rents. Yet the Minister has the gall to describe them as freely negotiated rents. There is no freedom for people facing the threat of homelessness; that is the point that the Government refuse to tackle.
We are discussing a distorted and unfair market, and it is deplorable that the Government are introducing legislation that will deprive tenants of any protection from unfair practices by landlords. The reference to freely negotiated rents is absurd.
My right hon. Friend the Member for Glasgow, Govan (Mr. Milian) mentioned experience in his constituency, where there has been palpably criminal conduct on the part of one private landlord. I have no doubt that there are perfectly reasonable private sector landlords in Scotland. No one wants to inhibit them, but the Minister has acknowledged on another occasion that there is a criminal element, and my right hon. Friend the Member for Govan made it clear that there has recently been a serious abuse in his constituency.
In spite of that, the Government are apparently prepared to open the floodgates and allow rents to go sky high, with no recourse to tribunals or controls of any kind. We want to ensure that there is a proper regime of fair rents, as there is now. We are not prepared to see tenants in Scotland making the sacrifices that the Minister seems prepared to impose on them.
We are extremely alarmed about the difficulties that will confront people claiming housing benefit in these circumstances. I shall quote from the Scottish Development Department's consultation paper on the private rented sector and the implications for housing benefit. Paragraph 13 states: ‘The rent set by the rent officer will not be a maximum rent chargeable for the dwelling. It will be open to the landlord to set the rent at the maximum eligible level, or to charge a higher rent and seek a tenant willing to pay that rent. It will be open to the existing tenant, should he have the means to do so, to make up the difference.’ How on earth can someone on housing benefit make up the difference? That is a formula for forcing these people out of their homes, and the Government are apparently 976 prepared to accept it. The formula means more evictions, more insecurity and more homelessness, and the Minister should he ashamed of himself. I urge my hon. Friends to vote for the new clause.
§ Question put, That the clause be read a Second time:—
§ The House divided: Ayes 175, Noes 230.
@DanC, like I said..... good analysis.
@intersted, nothing wrong with swashbuckling on occasions, but not the case on this one it seems.
@NeilJ; a modest fee charged to the tenants was and is illegal. What is your definition of modest? Not that it matters, any amount £1.00 or £500.00 brakes the law and tenants can reclaim the money paid.
@interested
Accept your view that average rents have been 'steady as she goes' across Scotland as a whole - though the Q4 2010 growth figure we have are 2.2%. We were genuinely surprised at the levels of growth seen in Edinburgh and Aberdeen which is were the highest recorded over the last 5 years. See table below (hope it formats ok?) - which will be included in our full Q4 report.
@Neil J
No manipulation of data - our report and analysis is based on same methodology as it has done for >5yrs
@Paul (also)
It takes more than 10min.
Annual growth % Edinburgh Glasgow Aberdeen Scotland
Q4 2008 4.5% 1.1% -2.2% 2.7%
Q1 2009 -0.8% 2.3% -2.9% -1.2%
Q2 2009 -3.2% -1.2% -5.0% -3.4%
Q3 2009 -4.3% -1.5% -6.8% -3.5%
Q4 2009 -3.9% -1.0% -1.9% -2.5%
Q1 2010 -0.1% 1.9% -0.1% 0.2%
Q2 2010 4.3% 2.6% 2.0% 3.3%
Q3 2010 3.2% 0.9% 2.7% 1.4%
Q4 2010 5.0% 3.0% 1.5% 2.2%
Q1 2011 3.5% -1.9% 5.7% 1.4%
Q2 2011 1.9% 1.9% 0.9% 1.4%
Q3 2011 4.1% 2.7% 3.1% 3.2%
Q4 2011 1.0% 1.9% 2.8% 1.9%
Q1 2012 2.9% 2.8% 0.7% 2.6%
Q2 2012 2.9% 1.3% 4.5% 1.4%
Q3 2012 1.3% 1.7% 2.4% 1.0%
Q4 2012 5.1% 2.2% 6.3% 2.3%
@NeilJ - Rents may be dictated by the market but the person who makes the decision around what rent to ask or accept is the landlord, the owner of the property. I think if we're resorting to epithets like 'Greedy' then the discussion has become rather too emotional. Agents just want to make money to survive and grow as businesses, nothing intrinsically wrong with that; and if Landlords are 'Greedy' to want to maximise returns on the often very large and extraordinarily risky investment they have made in the property they are letting then clearly someone has a problem with the way the current capitalist system works. It is a BUSINESS. It works within the LAW. If you as a businessman have suffered because of dodgy practices then I can understand your bitterness - and heaven knows I've been in similar situations - but please do not tar everyone with the same brush. I'm a Landlord purely and simply because at the time I made the investment it seemed the least risky way of getting something like a liveable retirement income together after Mr Brown destroyed my pension. Many others are in the same position - and often not in a position where they can actually afford any additional costs. Would you have people get into financial difficulty or go bankrupt because of your personal feelings about the perceived 'unfairness' of passing on charges?
@Industry Observer: yes - I have a vested interest. Don't you?
@Paul Rents are dictated by the market not Landlords or Agents. We review rents at the end of each tenancy or annually as per our Tenancy Agreements. We have suffered loss of business due to Agents severely undercutting our fees and then charging tenants to make up the difference. Its all come home to roost in Scotland with these Agents trying to justify why their clients should accept higher fees.
Unforetuneately these Landlords will now suffer from their desire to get something for nothing.
Greedy Landlords + Greedy Agents quite a toxic mix
@NeilJ: I don't know how it works in Scotland, but in England the person who sets the rent for a property is the Landlord, not the Agent. Other commenters have suggested that the rise in rents in Scotland may be due to normal increases in line with historical trends, and if your client Landlords are not jumping up and down and asking for extra dosh then that's lovely. There are of course lies, damn lies and statistics. However I can assure you that as both a Landlord myself and as someone associated with an Agency in England, I would be very surprised if many Landlords in this country would stand still in the face of extra charges by their Agent - they would either be off to another agent or if all agents were passing on those charges the rents would be up, up, up to cover the difference!
@Neil J
"The changes are affecting YOU not the Landlord and you should firstly not have been charging illegal fees and secondly not taking it out on your tenants."
Couldn't agree with you more if I had written these words myself.
@Paul
Shame on you, the trouble with agents commenting on this is they have a vested interest.
i took a look at the historical trends too using Citylets data and there have been bigger national rises in the past. when i looked at the link in the article though it leads to what i'm guessing is the source of today's story and it seems a better overview. basically the national picture is as has been but spikes in edinburgh & aberdeen rents. fine with me...or is that too non-pc thesedays?!
@Paul I am an Agent who, like many in Scotland, has never charged illegal fees to Tenants. We did charge a modest referencing fee which now gets charged to the Landlord. I advised all my Landlords of the new regulations and what they would be charged. I have not had one Landlord storming into my office demanding that rents be raised immediately to cover these additional costs. In fact I have not received any adverse comment whatsoever. Most of them are savi enough to realise it is the Agents problem not theirs.
If rents are rising due to new legislation then it is the Agents causing this hietus not the Landlords. Our average rental is now 18mths which means that over this period the Landlord must absorb around £50 addtional cost. No big deal based on our rents in Glasgow which have been rising steadlly before Citylets report and the changes in Legislation
We are on the ground we know what is happening in our market we do not need manipulated statistics to try and tell us it is all Shelters fault. Agents only have themselves to blame not Shelter or their Landlords
Economics 101: supply vs demand. If there is demand for a commodity, prices rise.
In 2010 prices were up 5% and it took 26 days to let a flat in Edinburgh
2011 it took 31 days and prices came down
2012, 26 and prices rose
What did Shelter do in 2010 to cause this rise?
Aberdeen is the only city in Scotland to show growth, probably due to oil and gas, so demand increased.
One thing is for certain city lets is getting better at PR.
@Paul I agree and it was so damn obvious that the very people Shelter were trying to help have been kicked fairly and squarely in the teeth.
So many good posts here and they are all along the same line (except those who are not involved in the letting business)
One day these do gooders will realise that they do themselves no good whatsoever. Those that support them will now have less to send to them as their favorite charity since all they have achieved is rising prices.
The Citylets research takes about 10 minutes to do and we can all do this and clearly see rising rents to pay for what shelter wanted abolished. All it did was shift the costs to someone else on a temporary basis ie landlords and they sent it back probably 3 fold to the victim as seen by Shelter as being ripped off. The rip off stated and now will not go away. Its all round things because it is not compulsory to use a letting agent but convenient and a very simple way of finding suitable rented property.
I bet in many cases the ones moaning about the fees were ones who had a bad credit history and were refused. They then probably had the cheek to go back to the agent asking for a refund. Some hopes as once the search is done the money is spent. Life’s a bitch aint it?
Good data but very poor analysis which barks up the wrong tree somewhat. Rents have been increasing anyway at various rates in Scotland:
Q4 2010 up 5%
Q4 2011 up 1.9%
Q4 2012 up 2.3%
and if we look at 2012:
Q1 up 2.6%
Q2 up 1.4%
Q3 up 1%
Q4 up 2.3%
(Source: Citylets)
So as we can see, the Q4 2012 increase sits in the middle of the increases of 2010 and 2011 and is clearly not the highest of 2012 (Q1 before the shelter campaign took hold). The Q4 2010 increase is way higher (5%) than the increase debated here.
I'm not sure if the message on the increase is down to poor reporting by LAT or PR from Citylets, but its a bit of an own goal (not quite in the realms of Zoopla though!) to start pointing the finger at LA's increasing their rents to protect bottom line (which will aslo get Shelters noses up) when the figures here simply indicate historical trend.
As a customer of Citylets, disappointed to read you headline take on what is excellent data. But I do hope it is just down to poor reporting.
Totally agree with Industry Observer, demand is driving the overall increase. Andy, I think you need read these things more closely before making swashbuckling statements about how good they are.
@NeilJ: clearly you're another one of those people who think you're doing Agents and Landlords a favour by doing business with them and that they should operate as charities for your benefit, not charging anyone anything. Sadly that is not a viable business model however much you and Shelter want it to work that way. There are costs involved - someone has to pay them because sure as eggs is eggs the Agents ain't gonna take on that cost. Landlords aren't going to pay them because they're in business to make a profit. So the only people who are always going to end up paying are the Tenants one way or another. Join the real world and stop wailing and gnashing while you sit there wearing your politically correct blinkers. I very much doubt you work for nothing. Until someone suspends the laws of supply and demand that's the way it is.
@Andy How could you prempt a decision still to be made. The problem, with your fees, only occurs at renewal....some Agents have given a blanket increase across the board to ALL tenants irrespective of their current tenancy status....that's vindictive in today's economic climate.
The only additional cost to the Landlord is the reference fee which costs around £10/tenancy at renewal ....what you get is an additional percentage of the increase which amounts to around £7/mth.
The changes are affecting YOU not the Landlord and you should firstly not have been charging illegal fees and secondly not taking it out on your tenants.
@neilj
Tempting not to reply but if you want a factual account and understanding of the drivers behind decisions to dissolve the network last year, please come in for a chat. being the most visited residential letting site in the UK was a factor.
Our analysis is as always to report on the facts and provide impartial comment on the apparent drivers without judgement.
Many agents acted ahead of November and certainly very quickly throughout November and December. There is nothing vindictive about such actions, letting agents are faced with a very difficult and unreasonable scenario. Shelter have made a huge error of judgement in fighting the tent fee campaign and what are probably the unintended consequences (although obvious consequences to industry professionals) are very serious. Well done Citylets, good analysis and a market leading report.
On the basis the legislation came into effect November 2012, giving time to digest the situation and react how can Citylets give such an accurrate assessment when we have not had a full quarter yet to analyse.
Scaremoungering and a good PR exercise to draw attention to their site now as Lettingweb, s1homes and Zoopla have dumped them.
Anyone in Scotland knows the cities have been bouyant, outwith many areas are seeing stagnant or falling rents. I suppose they will blame this on Shelter as well.
If Agents have increased rents, as a result of the legislation, it clearly demonstrates a vindictive act against their tenants. Something that will not be missed by all interested parties.
@raycomer
They can't ignore this, surely. It's more than collateral damage- it's a fundamental upward pressure on rents in an increasingly 'landlords Market ' which will impact many. Higher asking rents will be met it seems.
Calamitous own goal- a bit like wot when that goalie threw the ball in his own net.
Very understandable reactions in the posts soon as I saw the headline I knew what to expect below.
Statistically true of course, but also at a time of insatiable and rising demand.
What happens when, as eventually will be the case as all things financial go in cycles, demand softens and Landlords have to compete a bit more for tenants - especially those with average or below quality properties?
Political posturing over practical assistance - all to get headlines and more funding.
Dear Shelter
Please focus on reducing Homelessness rather than the opposite
Thanks
Shelter won't give a toss about this; as far as they will be concerned its just collateral damage from a political move made by them; sure, they'll try to claim the moral high ground and say its profiteering by landlords and agents and not as a result of their meddling, but the end result is the same, higher rents for tenants.
Oh dear...this was inevitably the end result.
@shelter...you can't argue with the hard facts...are you big enough to rethink your approach to the sector?
Rents up AND market moving faster then ever.
Well done Shelter on making housing LESS affordable in Scotland!
This was totally predictable and inevitable.
Shelter has meddled and the legislators have over-reacted - it costs money to set up a tenancy and, so long as the fees to the tenant are fair, legal and totally transparent, tenants are prepared to pay them.
Moving the costs onto the landlord was inevitably going to mean that these costs were going to be added to the rent so the tenant ends up paying them anyway.
Nice one Shelter!!!!! Perhaps the powers that be in Shelter will think twice before meddling with tenant fees in the UK - but I doubt it. Much more sensible to licence all letting agentsincluding mandatory membership of the Ombudsman which will get rid of the rogues and, because high tenant fees are not only charged by the dregs of the industry by any means, make sure tenants know that they have the right to redress if they feel they have been ripped off. It's not rocket science!