Rents rising ahead of tenant fee ban

Rents rising ahead of tenant fee ban

The upcoming ban on tenant fees has ignited a long-running debate in the rental sector. Many lettings agents have expressed worries about how their operating costs will be affected, and some landlords have been considering the impact of another regulatory change on their portfolios. However, recent news from the Association of Residential Letting Agents (ARLA) should offer encouragement to both groups.

According to letting agents, the number of tenants experiencing rent increases rose in January for the first time since September, with 26% of ARLA members reporting that rents were going up compared to 18% in December 2018.

This is the highest figure for more than three months and represents a 7% year-on-year rise, showing that the year has started strongly.

In addition, the ARLA figures show that both the supply of properties available to rent and the demand from prospective tenants also increased in January.

David Cox, the chief executive of ARLA, said: ‘This month’s results are another huge blow for tenants. With demand increasing by 46% from December, and rents starting to rise in response to all of the cost increases landlords have experienced over the last few years, tenants are in for a rough ride.

‘Last month, there were three landlords selling their buy to let properties per branch, and as landlords continue to exit the market, rent prices will only continue to rise.

‘With the Tenant Fees Act passing its final hurdle in the House of Commons and receiving Royal Assent this month, tenants will continue bearing the brunt, as agents and landlords start preparing for a post tenant fees world’

It was always likely that an increase in fees would be passed onto tenants in some form. After all, the point of the bill was to reduce the large, up-front lump sum which often prevents people from moving home. If it is spread out over a tenancy, it becomes less of a burden.

From the landlords’ point of view, these rent rises should be encouraging and allay minor fears that bills might go up. Over the course of a tenancy the costs even out and the landlord is unlikely to end up losing out.

The fundamental truth underpinning the health of the UK property investment sector remains the same: a huge number of people cannot afford to purchase their own home and must remain in the rental sector. More still are actively choosing to rent in the long term because they prefer the freedom that lifestyle offers.

Until and unless this changes, minor regulation such as a ban on tenant fees will not have a particularly onerous effect on landlords. In the grand scheme of things, minor costs will be eaten up by rising rents. The UK buy to let sector remains a profitable and stable one, and investors can have confidence that this state of affairs will continue into the future.

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