A draft bill is progressing through the legislative process. Given the concept is supported by all major parties, it is not expected to fail. We expect it will come into effect in Spring 2019. We believe it will only apply to new tenancies started from then. The effect is that agents can no longer subsidise landlords’ fees by charging tenants any fees. This will result in increased costs to landlords and, ultimately, increased rents.
That subsidy is equivalent to £25 a month over a typical 18 month tenancy. As typical tenancies involve a couple the subsidy is effectively £12.50 per tenant per month.
Assuming rent inflation of 3% (it was 3.6% last year) then this cost is entirely covered by rent inflation for the overwhelming majority of our landlords’ properties. This change is unlikely to be welcomed by our landlords, particularly on the back of stamp duty change and mortgage interest no longer being tax allowable. However, despite these changes, the forecast for the letting market remains very positive, with demand outstripping supply and returns for landlords continuing to outstrip other investments.