Last week we speculated on how the tenant fee ban will affect landlords, agents and tenants. You can read our thoughts here.
At CPS Homes, we've forecasted that we'll lose 35-40% of our income following the ban.
As such, like virtually every other agent, it's inevitable that we will have no choice but to increase our fees to new and existing landlord clients. Quite simply, we will be unable to absorb the estimated eight hours it takes to set up a tenancy without significant detriment to our level of service.
More specifically, we're likely to follow in the footsteps of many of our English counterparts and introduce more transparent fees for the work involved in setting up a tenancy, rather than increase existing charges. For example, we have seen other agents introduce landlord charges for services such as referencing, entry/exit inventories and deposit registration. We will be in touch with our clients personally as and when we finalise things.
Armed with this news and having read about the potential for rent increases further up, our clients' heads may understandably turn towards when, or if, rents will rise.
Two weeks after the ban was introduced in England, a North London agent wrote to all its landlord clients to advise of their increased fees. To offset this extra cost, they recommended raising the rent of every property on their books by £20 per month. Categorically, this approach will not work in Cardiff.
Extreme caution must be taken when increasing rents. Whether they are viable or not depends entirely on the wider market, and the Cardiff market will not be able to absorb an instant increase like the one suggested by this London outfit.
We've been reporting for some time that supply is outstripping demand for rented properties in Cardiff – in part due to Brexit – so have been urging landlords to be content to receive the same level of rent from tenancy to tenancy. Backing this up, The Guardian recently reported that rents across Britain fell in 2018 for the first time in a decade, after years of inflation-busting rises.
We're sure rents will rise as a direct result of the tenant fee ban, but it will be a gradual process. Push the button too quickly and landlords will find themselves priced out of the market, sat on an empty property.
Naturally, some landlords with a mortgage to pay each month will be unable to absorb extra costs – even with the potential for extra rental income – so will exit the market. ‘Luckily' for them, buy-to-let rates remain highly competitive, so there will be no shortage of investors wanting to start or expand their portfolio if the property comes onto the market at a realistic price.