JUNE 24, 2019 | BY A & S Property
How the tenant fee ban is changing buy-to-let

The tenant fee ban is new to most of the UK, but has been in place in Scotland since 2012. Advocates of extending the ban throughout the rest of the UK pointed to the fact that rents in Scotland have not risen significantly in the intervening years.

While this may be true (depending on your definition of significantly), there are many differences between the housing market in Scotland and the housing market in the rest of the UK, particularly England.

Because of this, it might actually be easier and more accurate to set aside the Scottish housing market when considering what the tenant fee ban could mean for other parts of the UK.

The practicalities of extending the tenant fee ban

Not only does England have a larger population than Scotland, but, in much of the country, it also has much greater population density. This leads to increased demand for housing, especially rental housing and thus buy-to-let property investors who do remain in the market could well have more flexibility to raise rents than their northern counterparts.

They may also have more motivation to do so because one of the major differences between the Scottish housing market and the English one is that Scotland is exempt from the Right to Rent legislation, hence landlords can be more relaxed about setting up tenancies themselves and then using lettings agents for day-to-day property management.

Landlords in England, however, still have to think much more seriously about the personal liability they face if they either take in a tenant who does not have the “Right to Rent” or breach the Equality Act when undertaking “Right to Rent” checks. This may provide a compelling argument for continuing to use lettings agents and passing the cost on to tenants.

Landlords in England are selling up - sometimes fast

It’s also worth noting that many former buy-to-let property investors have exited the market over recent years and it seems likely that more will do so in future. While this exodus may not have been entirely caused by the prospect of the ban, it does have the impact of reducing the supply of rental property and/or reducing competition amongst landlords.

 

New research from Sellhousefast.uk looked at 10 of the UK’s key buy-to-let markets, namely Birmingham, Canterbury, Colchester, Coventry, Enfield, Luton, Manchester, Peterborough, Stockport and Wolverhampton.

It found that the area in which properties sold most slowly was Wolverhampton, but even here, the average sales time was just 138 days.

The area in which properties sold most quickly was Stockport, where sales took an average of just 104 days and this was closely followed by Coventry where the average sale took 124 days.

This is hardly surprising given that popular buy-to-let locations, by definition, are places where there is strong demand for property. What is, however, currently unclear, is whether these properties have been bought by residential buyers or by committed buy-to-let investors looking to expand their portfolios as, one way or another, this could have a significant impact on the housing market.

Mark Burns is the managing director of property investment company Hopwood House.


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