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Why letting agents should be relishing 2019

Tuesday 08 January 2019

We catch up with Simon Tillyer, Director of Vouch and Shefflets as we get his personal thoughts on why, despite the forthcoming Tenant Fee Ban in England, there are still reasons to be cheerful, and opportunities available.

You could be forgiven for thinking that the letting agent market is in serious trouble, with all the doom and gloom in the media and talk of large and small agents going to the wall, thanks to the tenant fees ban.

Indeed, findings from the latest annual report from Fixflo reveals that the fees ban could entirely wipe out some agents’ profits, with half of agents believing they will lose between 10 per cent and 30 per cent of their revenue and almost 10 per cent of those asked, said they would lose 30% or more of their income. Agents cited loss of revenue as their biggest challenge in 2019 (41 per cent), while 32 per cent said it would be winning new landlords.

Most worryingly, almost half (48 per cent) said they are wondering whether to carry on because of developments in the lettings industry. This is supported by findings from the National Landlords Association (NLA) that show around 380,000 buy-to-let property owners are looking to sell within the next twelve months. The data from the NLA also reveals that nearly a fifth of all UK landlords are looking to sell their buy-to-let properties, with almost 50 per cent of them selling a flat or apartment.

Without doubt, the current market conditions are tougher than we have ever seen before. Tenants are staying in properties for longer, there is a growing shortage of rental stock and tenant demand is rising. The Government has completely misjudged the impact of the tax hikes, which will inevitably hurt tenants financially, as landlords try to recoup eroded profits.

For agencies like mine, the fee ban threatens our very existence, unless we can find ways to supplement the lost fee income. As it represents 20 per cent of our turnover, it’s a significant chunk of income to find. Many landlords can’t afford to incur any further costs, so an obvious option is to pass on the costs to the tenant, via increased rents.

It’s inevitable that weak agents will not survive, especially if they are heavily dependent on tenant fee income. We are likely to see continued consolidation, with the corporates hoovering up smaller agents, if the price is right.

So, what can the rest of market put in place to ensure they survive and prosper in 2019?

I believe there are a number of opportunities that will strengthen letting agent business models including:

• Build strong property portfolios and provide an excellent customer service to landlords and tenants. Many agents that are managing property portfolios will be able to compensate for the fees ban. It’s a good time for agents to review their business processes and see what is working and what isn’t. Ask yourself, how good is your customer service - what is the level of satisfaction amongst your landlords and tenants? Are there areas that can be improved?

• Restructure your business – step back and evaluate your landlord portfolio to see if it is cost effective. Decide which landlords you should keep and which ones should go e.g. unprofitable. Look at ways to improve efficiencies in the business and make savings. Streamline your business.

• New opportunities - agents going out of the market will leave opportunities to pick up new properties and landlords. The more bad companies that go out of business means more business for the good agents. It’s also a great time to sell them the benefits of your superb service, especially if they have been left high and dry, or had issues with the old agent. They may be ready to pay for a proper service.

• Consider proptech solutions – many of them offer letting agents ways to save costs, improve efficiencies and increase income. We have developed a referencing app to offer other agents a fully automated, web-based system delivering significant cost savings, via a comprehensive, time-saving solution. Technology and applicants perform the tasks, meaning that agents simply monitor progress.

For more information, please visit www.vouch.co.uk or call 0330 333 7272.