Here are the key points for property investors to take from the Autumn Statement…
At the forefront of the Chancellor’s statement was an effective ban on letting agent fees. Phillip Hammond said: “in the private rental market, letting agents are currently able to charge unregulated fees to tenants. We have seen these fees spiral, often to hundreds of pounds. This is wrong. Landlords appoint letting agents and landlords should meet their fees. So I can announce today that we will ban fees to tenants as soon as possible.”
Many reputable agents would disagree with this statement but it is hard to argue that there isn’t a problem with a system where tenants are regularly charged up to £650 per application. The head of the Association of Residential Letting Agents (ARLA) immediately spoke out against the measures, saying they would hit the market badly as agents would be forced to pass the fees on to landlords.
This could be, however, a positive move for landlords and agents alike as regulation and measures to protect renters are likely to fuel a surge in consumer confidence. Currently the average fees charged by some agents are unjustifiably high and those that charge reasonable rates should find no problem with attracting new business. For landlords it presents a double positive as agents are forced to become more competitive to attract their business, and as such improve their service, and also consumer confidence and subsequently demand will rise as a result.
With increased demand comes increased value and rising rental yields—A small rise in initial agent fees could be pocket change in comparison to greatly increasing demand in a market which shows no sign of adding sufficient supply.
The Chancellor went further in his attempts to boost the property market with the announcement that the government would further invest in to infrastructure projects to free up land for development.
One of the main issues stated by developers about building on currently empty land was a lack of roads and facilities that would make it difficult to sell newly developed properties. The government, in response, will now seek to begin a large-scale investment project to relieve this problem.
Off-plan property has been a major success story in recently stormy economic times, and investment both domestic and foreign has surged since the Brexit vote as domestic investors seek safe haven and foreign investors make the most of a generous exchange rate.
These announcements are likely to boost planned development projects which will be positive for job growth and overall investment. With capital growth and rental yields already high in the sector, potential and existing landlords should be happy with the news.
In an otherwise gloomy Autumn Statement, the Chancellor gave a real statement of intent to help the housing market with his plans for investment in house building, a change to letting fees laws and infrastructure investment. It has arguably now become clear to the treasury that the property market has become a constant in an economy of peaks and troughs. With this in mind, it seems as though the chancellor is taking this seriously and, although not too much meddling or intervention is required in order to let the industry continue to grow, the government appears to have struck a good balance. Investors, landlords, letting agents and tenants may have been initially anxious about these announcements but it’s fair to say that the eventual outcome will be positive for all involved.