North Manchester Landlords and Tenants : What does the Tenant Fee Banning order mean for you?

 

  • Tenant Fees set to banned within 12 to 18 months
  • Rents due to rise as those fees passed to Landlords
  • Landlords won’t be worse off – and neither will tenants or agents

 

With our new Chancellor of the Exchequer revealing a ban on tenant fees in his first Autumn Statement on Wednesday what does this actually mean for North Manchester tenants and North Manchester landlords?

 

The private rental sector in North Manchester forms an important part of the North Manchester housing market and the engagement from the chancellor in Wednesday’s Autumn Statement is a welcome sign that it is recognised as such. I have long supported the regulation of lettings agents which will ensconce and cement best practice across the rental industry and,  I believe that measures to improve the situation of tenants should be introduced in a way that supports the growing professionalism of the sector. Over the last few years, there has been an increasing number of regulations and legislation governing private renting and it is important that the role of qualified, well trained and regulated lettings agents is understood.

 

Great News for North Manchester Tenants

 

So, let’s look at tenants. this is great news for them, isn’t it?  Well before you all crack open the Prosecco, read this …

 

Although I can see prohibiting letting agent fees being welcomed by North Manchester tenants, at least in the short term, they won’t realise that it will rebound back on them.

 

First up, it will take between 12 and 18 months to ban fees, as consultation needs to take place, then it will take an Act of Parliament to implement the change. A prohibition on agent fees may preclude tenants from receiving an invoice at the start of the tenancy, but the unescapable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents.

 

Published at the same time as the Autumn Statement, hidden in the Office for Budget Responsibility’s Economic and Fiscal Outlook on the Autumn Statement (The Office for Budget Responsibility being created by Government in 2010 to provide independent and authoritative analysis of the UK’s public finances), it said on Wednesday …

 

“The Government has also announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast. Nevertheless, it is possible that a ban on fees would be passed through to higher private rents”

 

 

The charity Shelter and Scotland

 

Scotland banned Letting Fees in 2012. The charity Shelter have been a big voice in persuading and lobbying the Government since it managed to persuade the Scottish Parliament to ban fees in 2012. On all the TV and radio shows at the moment, they keep talking about their Independent Research, which they said showed that,

 

“renters, landlords and the industry as a whole had benefited from banning fees to renters in Scotland. It found that any negative side-effects of clarifying the ban on fees to renters in Scotland have been minimal for letting agencies, landlords and renters, and the sector remains healthy.”

 

Going on,

 

“Many industry insiders had predicted that abolishing fees would impact on rents for tenants, but our research show that this hasn’t been the case. The evidence showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK. It found that where rents had risen more in Scotland than in other comparable parts of the UK in 2013, it was explained by economic factors and not related to the clarification of the law on letting fees”

 

.. yet the devil is in the detail….

 

Only yesterday Shelter were quoting this Research from December 2013 to say rents never went up following the tenant fee ban in Q4 2012. I have read that research and I agree with that research, but it was published three years ago, only 12 months after the ban was put into place.

 

I find it strange they don’t seem to mention what has happened to rents in Scotland in  2014, 2015 and 2016 .. because that tells us a completely different story!

 

What really happened in Scotland to rents?

 

I have carried out my research up to the end of Q3 2016 and  this is the evidence I have found..

 

In Scotland, rents have risen, according the CityLets Index

by 15.3% between Q4 2012 and today

 

(CityLets being the equivalent of Rightmove North of the Border – so they know their onions and have plenty of comparable evidence to back up their numbers).

 

When I compared the same time frame, using Office of National Statistics figures for the English Regions between 2012 and 2016, this is what has happened to rents

 

  • North East 2.17% increase
  • North West 2.43% increase
  • Yorkshire and The Humber 3.21% increase
  • East Midlands 5.92% increase
  • West Midlands 5.52% increase
  • East of England 7.07% increase
  • South West 5.82% increase
  • South East 8.26% increase

 

  • London 10.55% increase

 

….and let me remind you about Scotland … 15.3% increase.

 

 

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Are you really telling me the Scottish economy has outstripped London’s over the last 4 years? Is anyone suggesting Scottish wages and the Scottish Economy have boomed to such an extent in the last 4 years they are now the Powerhouse of the UK? because if they had, Nicola Sturgeon would have driven down the A1 within a blink of an eye, to demand immediate Independence.

 

 

 

So what will happen in the North Manchester Rental Market in the Short term?

 

Well nothing will happen in the next 12 to 18 months it’s business as usual!

 

… and the long term?

 

Rents will increase as the fees tenants have previously paid will be passed onto Landlords in the coming few years. Not immediately .. but they will.

 

As a responsible letting agent, I have a business to run. It takes, according to ARLA, (Association of Residential Letting Agents) on average 17 hours work by a letting agent to get a tenant into a property. We need to complete a whole host of checks prescribed by the Government; including a right to rent check, Anti Money Laundering checks, Legionella Risk Assessments, Gas Safety checks, Affordability Checks, Credit Checks, Smoke Alarm checks, Construction (Design & Management) Regulations 2007 checks, compliance with the Landlord and Tenant Act, registering the deposit so the tenants deposit is safe and carry out references to ensure the tenant has been a good tenant in previous rented properties.

 

All of which the vast majority of lettings agents take very seriously and are expected to know inside out making us the experts in our field. Yes, there are some awful agents who ruin the reputation for others, but isn’t that the case in most professions?

 

.. but business is business.

 

No landlord, no tenant and certainly no letting agent does work for free.

 

I, along with every other North Manchester letting agent will have to consider passing some of that cost onto my landlords in the future. Now of course, landlords would also be able to offset higher letting charges against tax, but I (as I am sure they) wouldn’t want them out of pocket, even after the extra tax relief.

 

So what does this all mean for the future?

 

The current application fee for a single person at my lettings agency is £150 and for a couple exactly the same .. meaning on average, the fee is around £150 per property.

 

I am part of a Group of 500+ Letting Agents, and recently we had to poll to find the average length of tenancy in our respective agencies. The Government says its 4 years, whilst the actual figure was nearer one year and eleven months, so let’s round that up to two years.

 

That means £150  needs to found in additional fees to the landlord, on average, every two years.

 

In Actual Pound Notes

 

In 2005, the average rent of a North Manchester Property was £425 per month and today it is £550 per month, a rise of only 13.1%(against an inflation rate (RPI) of 38.5%).

 

Using the UK average management rates of 10%, this means the landlord will be paying £660 per annum in management fees.

 

If the landlord is expected to cover the cost of that additional £150 every two years, rents will only need to rise by an additional 2% a year after 2018, on top of what they have annually grown by in the last 5 years.

 

So, if that were to happen in North Manchester, average rents would rise to £640 per month by 2022  (see the red line on the graph) and so the landlord would pay £768 per annum in management fees .. which would go towards covering the additional costs without having to raise the level of fees.

 

nmgraph

 

 

.. but that is bad news for North Manchester Tenants?

 

Quite the opposite. Look at the blue line on the graph). If the average rent North Manchester tenants pay had risen in line with inflation since 2005, that £425 per month would have risen today to  an average of £589 per month. (Remember, the average today is only £550 per month) .. and even if inflation remains at 2% per year for the next six years, the average rent would be £640 per month by 2022 .. meaning even if landlords increase their rents to cover the costs tenants are still much better off, when we compare to the £618 per month figure to the £640 per month figure.

 

Conclusion

 

The banning of letting fees is good news for landlords, tenants and agents.

 

It removes the need for tenants to find lump sums of money when they move. That will mean tenants will have greater freedom to move home and still be better off in real terms compared to if rents had increased in line with inflation.

 

Landlords will be happy as their yield and return will increase with greater rents whilst not paying significantly more in fees to their lettings agency. Letting agents who used to charge fair application fees won’t be penalised as the rent rises will compensate them for any losses.

 

.. and the agents that charged the silly high application fees .. well that’s their problem. At least I know I can offer the same, if not a better service to both my landlords and tenants in the future in light of this announcement from Phillip Hammond.

 

 

 

 

 

 

 

 

 

 

 

 

 

Government Landlord Bashing

We again have been hit with the government bashing landlords with additional taxes. We will all have opinions and some will change as the dust settles. A lot of landlords are in uproar calling this the end of buy to let especially after the damaging tax changes from the last budget meaning that there will be no tax relief on mortgage payments as it is reduced gradually over the next 4 years.

The stamp duty rates are

                                               

Property or lease premium or transfer value Before April 2016 After April 2016
Up to £40,000                            0%                                0%
From £40,000 to £125,000(the portion from £40,001 to £125,000)  0%                                3%
The next £125,000 (the portion from £125,001 to £250,000)                            2%                                5%
The next £675,000 (the portion from £250,001 to £925,000)

 5%

                               8%
The next £575,000 (the portion from £925,001 to £1.5 million)                          10%                              13%
The remaining amount (the portion above £1.5 million)                          12%                              15%

This new stamp duty tax will cost an extra £1350 on a property valued at £85,000

The new stamp duty tax apparently imposed to bring it much needed funds to help first time buyers and house builders is a 3% tax on you purchasing any additional buy to let property’s. This in itself certainly shouldn’t affect your decision to increase your portfolio as in real terms all this will do is mean that the return on your investment will only be delayed by 3 months or so. It has the potential to seriously distort the property market, as landlords and second homeowners rush to beat the April deadline and then go quiet. If you do continue to increase your portfolio, when it comes to selling up, you can offset purchase costs against any eventual capital gains tax – and that includes stamp duty. So, while you will get whacked with a big bill now, if a buy-to-letter eventually sells at a tasty profit, you can claim stamp duty back later on CGT. The Treasury confirmed to last night that this still remains the case. The question is, will it one day face the axe?

These changes only effect purchases over £40,000 being realistic these are not available in many areas and the areas where they are come with their own problems as far as renting them out is concerned. These areas are not in high demand by first time buyers and will over very little capital growth as their prices will remain low as many will try to purchase below the threshold

The majority of our landlords in the Manchester area hold property under the value of £125,000 as the rental returns in this area offer excellent yields. These properties are in demand because they offer some capital growth and great yields. I suspect there will be a small spurge in the market (especially in the auction rooms) between now and April from landlords buying however this will be short lived. I do think long term that these properties’ will rise in value as many landlords from the south and overseas who want to increase their portfolio move north for the better yields.

The impact of the removal of tax relief on mortgages will have an effect on the housing market over the next four years as some landlords decide to sell but along with the demand from first time buyers entering the market and increased interest from buyers from overseas and the southern market I see a continued increase in house prices of around 5% a year. This means house prices doubling over a 15 year period.

I see a larger increase in rental demand and along with the squeeze on landlords margins these cost being passed onto tenants resulting in an increase in rents. If rents increase at 5% a year that will also mean your rents doubling over 15 years also.

Imagine your current property/properties in 15 years’ time receiving double the rent you received at present and being worth twice as much. Taking into consideration inflation not expecting to increase by more than 2% it should leave landlords in comfortable position.

In the long term we will all get different visions from our crystal balls but we must always remember some golden rules.

Property investment is a stroll not a jog. Property investment is a long term investment.

There is a continual increase in demand for rental properties as we are not building enough and we have an ever increasing population mainly being caused by immigration at present

Manchester is a thriving city and it boundaries are forever increasing therefore your properties that are within easy reach of the city become more in demand and especially at the lower end as those people who work in the service industry in Manchester need easy access at inconvenient times at affordable cost but the increase demand will increase their rental cost which increases yields and attracts more investors again resulting in increased values.

We can’t predict what the chancellor is planning for the future or predict how the changes will affect things however we will always have to remain flexible to move with the changes and adapt to the changes

We at Brentwood lettings are always happy to help and give you our opinions however it remains the case that you must take financial advice for tax planning from the experts

REMAIN POSITIVE

Are Your Agents Fee’s Misleading?

As of 27 May 2015, it became a legal requirement under the Consumer Rights Act for all agents to show their fees as VAT inclusive. This measure, I believe has been introduced to once again clamp down on those rogue agents out there who are hiding their fee’s and misleading their landlords.

I get a real bee in my bonnet about lettings agents fee’s. You may have read my previous posts on hidden fee’s, price hiking and unfair fee’s. I’m now on my hobby horse about misleading fee’s.

I think my anger around fee’s stems from a basic human quality of honesty and trust. The way I work and the way I run my business is in a very open, upfront and honest way. I can do this because i’m a small independant. I manage less than 1000 properties and the book stops at me. I don’t have shareholders to please and pay, I don’t have a board to answer to and I do what I do because I’m a landlord, a business owner and an employer. I’m not a tycoon, I’m not a millionaire and I don’t wear a suit.

I have been running Brentwood Lettings for almost 20 years, and I pride myself on the quality ad the value of service my agency offers to our landlords. We don’t, and have never, advertise prices exclusive of VAT, we don’t add commissions to our contractors rates, we don’t double dip fee’s from both the tenant and the landlord and we don’t overstate our costs.

It would be bad practise for me to point fingers directly at my local competition, but I know all of the above are happening on my doorstep, to landlords within my catchment area and they are happening week in week out and have been happening for years.

If I could get all the landlords in Manchester together in one room and have the opportunity to say one thing to them, just one thing, I wouldn’t self promote, I wouldn’t sell, I wouldn’t even tell them who I was, i’d simply ask “Why are you letting your agent rip you off?” and offer them my phone number.

 

We publish all of our fee’s so nobody is left in the dark and nobody is left wondering about charges.

Click Here to Download our fees for Let Only Services

Click here to Download Our Fees For Property Management

 

 

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Why Isn’t Your Agent Publishing Their Fees?

If you went to tesco’s and had to wait until you reached the checkout before knowing how much something cost, would you shop there? Would you trust tesco? Would you feel good about going back there? No No No?

hidden feesThen why are so many landlords dealing with agents who are not transparent about their fee’s? They tell you a fee, but don’t tell you its exclusive of VAT, or that it doesn’t cover this that and that or that there is an additional fee if you want this, or that once that fee is paid there is also x y and z to pay. NO!

I get a real bee in my bonnet about lettings agents fee’s. You may have read my previous posts on hidden fee’s, price hiking, unfair fee’s and misleading fee’s.

I think my anger around fee’s stems from a basic human quality of honesty and trust. The way I work and the way I run my business is in a very open, upfront and honest way. I can do this because i’m a small independant. I manage less than 1000 properties and the book stops at me. I don’t have shareholders to please and pay, I don’t have a board to answer to and I do what I do because I’m a landlord, a business owner and an employer. I’m not a tycoon, I’m not a millionaire and I don’t wear a suit. But I do run a good agency that looks after my clients and their properties very well.

Having run an agency for the best part of 20 years, I can see how it would, in the short term boost revenue for the agency. But taking a long term view and thinking like a business partner towards my clients, I wouldn’t want to work with someone who was being underhanded and would not place my trust in a business that was not being upfront and honest with me.

It could be because I’m northern, or because I’m working class or because I’m a landlord myself, but I believe anyone acting on behalf of your property should have your best interests in mind, and not the health of their bank balance. I don’t want to be ripped off and I want to be able to trust that my agent is working for me and not for themselves and their shareholders.

When selecting an agent in future Ask The Right Questions. You can’t compare agents on just their management fee’s (truth be told you can’t compare on just cost but that’s another post for another day), One agent may charge 15% the next 16% – whos the better agent? Nobody knows! Who’s offering the best value for money? Again, nobody knows; ask:

What do they charge for drawing up a tenancy agreement? What is their letting fee? What are the costs for an inventory? What do they charge for a gas safety certificate? What do they charge for an EPC certificate? What would they charge you to change a lightbulb? What would be the expected costs over the course of your entire first tenancy?

Don’t be afraid to ask the questions, do your due diligence and stop letting the big agents rip you off.

What Hidden Fee’s Are In Your Agreement?

As an independent agent, I’m very lucky to not be bound by big company practises and habits. I get to forge my own path and I get to sleep well at night knowing that my business runs in an open, upfront and ethical manner.

It’s disappointing that over the years the sneaky practice of charging an additional commission to contractors for passing work their way has become the norm. This is not only penalising all the sole traders and small businesses who rely upon agents for their livelihood, but it is also being wholly dishonest to those who have placed trust in their business, their clients- the landlords!

Property Eye ran an article related to the current news about Foxtons, it states that agents could be adding from 5%-20% on top of their contractors bills and passing these price hikes back to their landlords.

Having run an agency for the best part of 20 years, I can see how it would, in the short term boost revenue for the agency. But taking a long term view and thinking like a business partner towards my clients, I wouldn’t want to work with someone who was being underhanded and would not place my trust in a business that was not being upfront and honest with me.

It could be because I’m northern, or because I’m working class or because I’m a landlord myself, but I believe anyone acting on behalf of your property should have your best interests in mind, and not the health of their bank balance. I don’t want to be ripped off and I want to be able to trust that my agent is working for me and not for themselves and their shareholders.

hidden feesWhen selecting an agent in future Ask The Right Questions. You can’t compare agents on just their management fee’s (truth be told you can’t compare on just cost but that’s another post for another day), One agent may charge 15% the next 16% – whos the better agent? Nobody knows! Who’s offering the best value for money? Again, nobody knows; ask:

What do they charge for drawing up a tenancy agreement? What is their letting fee? What are the costs for an inventory? What do they charge for a gas safety certificate? What do they charge for an EPC certificate? What would they charge you to change a lightbulb? What would be the expected costs over the course of your entire first tenancy?

Don’t be afraid to ask the questions, do your due diligence and stop letting the big agents rip you off.

We publish all of our fee’s so nobody is left in the dark and nobody is left wondering about charges.

Click Here to Download our fees for Let Only Services

Click here to Download Our Fees For Property Management

I’m Mike Brown, the owner and managing director of Brentwood Lettings. I am a landlord, a property developer and generally someone who knows a thing or two about letting properties. I can always make myself available for a chat, feel free to call my office 0161 681 3724

 

June Auctions – 31 Radnor Street Gorton

tips

 

This months Edward Mellor Auction, really does have some hot property this month (sorry for the summer related pun). Radnor Street is a 2 bed terraced house in Gorton.

 

In my eyes the attractive thing about Gorton is the potential yield and the potential for longer term tenants. I’d expect this property to fetch around £50-55k and could easily achieve a rental income of £500pcm (almost 10% yield)

As an agent, I have lots of experience in letting properties in and around Gorton and would be happy to talk with you if you were looking at this property, or other properties around East or North Manchester. Please feel free to drop in to my offices on Moston Lane, Manchester for coffee and a chat, or call me on 0161 681 3724.

Look forward to speaking to you soon!
 
Regards 
 
Mike Brown

June Auctions – 477 Moston Lane, Moston.

tips

 

Edward Mellor Auctions Salford Auctions have this interesting property listed for 4th June. Being just down the road from my office, i’ve had my eye on this for a conversion into 2 x 2bedroom flats.

The market in Moston is currently saturated with tenants looking for 2 bedroom properties, and this would be a perfect investment to pick up a healthy yield.

Over the past couple of years it has been rare to see a decent 2 bed property in Moston sit empty for more than a month, and this property could be a good mid-long term investment in the hands of the right developer. I’ll be excited to watch how the bidding goes on this.

 

If you are looking to invest in Moston or anywhere in East & North Manchester  and would like any assistance, then please drop in to my offices on Moston Lane, Manchester for coffee and a chat, or call me on 0161 681 3724.
Look forward to speaking to you soon!
 
Regards 
 
Mike Brown

June Auction – 5 Connie Street Openshaw.

tips

This property seems to be a little gem, Openshaw is an up and coming area thanks to the recent opening of the metrolink. Greater numbers of tenants are now looking for two bedroom properties in Openshaw thanks to its new 10 minute commute to the city centre.

This is a property I will have my eye on at the Edward Mellor Auction and will be valuing it as worth around £60-65k. I’d be expecting a rental income of at least £500/m which would put me at about a 10% yield.

I have tenants waiting for properties in Openshaw, so I know this will not stay vacant for any amount of time.

 

If you are looking to invest in Openshaw or anywhere in East & North Manchester  and would like any assistance, then please drop in to my offices on Moston Lane, Manchester for coffee and a chat, or call me on 0161 681 3724.
Look forward to speaking to you soon!
 
Regards 
 
Mike Brown

June Auctions – 12 Sledmere Close, Beswick.

tips

 

This property is excellent, im expecting it to fetch upto £80k, but even then a 3 bedroom semi in Beswick is expected to fetch around £575/m which gives a healthy yield of over 8.5%.

Beswick is becoming one of the hottest and most sought after areas in Manchester for investment property. With the developments at Sport City, the direct metrolink access and the proximity to the city centre, what was once a no-go area is quickly becoming -the- place to live and rent.

Rental properties in Beswick do not remain empty for long and this property, next week, is likely to be one that is popular amongst investors. I may even bid on this myself.

If you are looking to invest in Beswick or anywhere in East & North Manchester  and would like any assistance, then please drop in to my offices on Moston Lane, Manchester for coffee and a chat, or call me on 0161 681 3724.
Look forward to speaking to you soon!
 
Regards 
 
Mike Brown

June Auction- 118-120 Townley Road

tips

Upcoming Edward Mellor Auction on 4th June has a nice property in Middleton (118-120 Townley Road). This could be one to keep your eye on, as it has a great potential yield in excess of £10,000pa

Each of the two flats could happily pull in £425/m without much work and possibly more if the right investor was to purchase the property.

I have tenants waiting for flats in Middleton, and this area is popular, well serviced by bus, close to the motorway and pretty well sought after.

If you are looking to invest in Middleton or anywhere in East & North Manchester  and would like any assistance, then please drop in to my offices on Moston Lane, Manchester for coffee and a chat, or call me on 0161 681 3724.
Look forward to speaking to you soon!
 
Regards 
 
Mike Brown

 

Ben Street Clayton Main image

Ben Street

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Teddington Road

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St Georges Drive

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Honister Road

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Lowton Avenue Moston Main image

Lowton Avenue

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Silton Street

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Ruth Avenue New Moston Main image

Ruth Avenue

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