Make the most of a less than perfect housing market

When looking back at 2016 it’s very difficult to know where to begin – so much has happened over the last 12 months that it perhaps makes more sense to come more up to date and just review the more recent past.

John Phillips
9th January 2017
Front Doors
"Should we really have been surprised that the Government chose to introduce measures which would affect letting agents and landlords though?"

Since my last article we have had the much-anticipated Autumn Statement and it will not need me to tell you that the Chancellor, Philip Hammond, dropped a considerable bombshell on the lettings agency market by announcing the banning of upfront fees to tenants. There is some way to go until this makes it onto the statue books, with a consultation next year, and implementation anticipated in 2018 but given there was no inkling of what might be announced, plus the Government’s own Housing Minister had publicly criticised the policy just weeks before, then to say it was something of a surprise would be an understatement.

Should we really have been surprised that the Government chose to introduce measures which would affect letting agents and landlords though? After all, the private rental sector and buy-to-let market has been increasingly on both politician’s and the regulator’s radar for some time. Banning tenant fees was always going to be a populist approach – considering the growth in ‘Generation Rent’ – and so it has proved.

The big question, of course, in all of this is just who will end up paying? We are already hearing that this is being described as a ‘tenant tax’ as most appear to anticipate landlords putting up rents in order to cover the increase in their fees. It remains to be seen just how feasible this will be given it is the market that determines rent levels and pricing oneself out of the market may not be the best possible idea for a landlord.

Certainly, from a letting agent perspective, there will be a period of uncertainty especially if – as I suspect – most tenants believe that the ban has already been introduced, rather than possibly being one year away. Overall, I believe that landlords will seek to pass this on but whether they’ll be able to achieve this 100% remains to be seen.

The other major news from the Autumn Statement, unsurprisingly, focused on greater investment and resource into the building of new homes – whether deemed ‘affordable’ or otherwise. The Government’s Big Housing White Paper is not due until next year and we therefore await more detail on this but, as a perennial problem, we have a huge job on our hands to build the required number of new homes this year or next, let alone make a start on the shortfall over the past decade.

We have not got close to the widely used figure of 250k new homes required each year so you’ll forgive me if I don’t hold my breath over a huge increase in supply. Clearly, it’s a positive that the Government recognises this problem and more money is being thrown at it, but let’s not think that this can be solved in one/two/five/maybe 10 years. This is a generational issue with a huge number of problems and obstacles to overcome, not least finding the land, gaining the planning, having house builders willing and able to build more, finance available for people to buy, etc. The list goes on. One would hope that the Housing White Paper will be delivering a joined-up strategy in this regard but the overriding problems are likely to exist for some time to come.

For agents as a whole I suspect 2016 could best be described as ‘mixed’ – various factors have influenced the purchase market and I don’t think any of us would say this is the most buoyant and positive time we have seen. One also has the underlying feeling that 2017 could well bring more of the same, especially when it comes to both housing supply, confidence in the economy, and the beginning of the Brexit negotiations. For those who may not need to move, the incentives to move are slowly ebbing away – there appears to be much more focus on staying put, perhaps adding value through extending, and not having to shell out for some of the huge costs that come with moving.

Stamp duty of course being one of them. It was perhaps wishful thinking on our part to hope that Hammond might make significant stamp duty changes but undoubtedly getting rid of the 3% extra charge for additional properties would have provided a big boost, as would have something for first-timers, second-steppers and (dare I say) those with more valuable properties, a market which has suffered considerably since stamp duty rates were raised. It would not have been a panacea but I think it would have offered those looking to move much more of a reason to do so – it looks however that the current system is here to stay for some time, or perhaps until the Government realises the tax take is way down on what they would like it to be.

I’m afraid it’s not a particularly positive outlook however I am constantly encouraged by the resilience of the agency market and I’m confident that you will make the most of the market, even if it’s not anywhere near perfect. And on that note, may I wish you all a very Happy New Year.

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