If the last few years are anything to go by, 2016 will be another interesting 12 months for letting agents up and down the country.
If the trajectory of this year is similar to that of 2015 – which we recently reviewed here – then expect lots of growth, regulatory changes as well as more tenants and landlords.
Here we've taken a look at ten things which will affect letting agents during 2016...
Right to Rent
This Government scheme – which has been on most agents' and landlords' radar for a while now – has finally come into force. Right to Rent needn't cause letting agents too much extra hassle and our HomeLet Verify tool allows you to incorporate Right to Rent checks into your existing processes.
Here we have another issue which has generated plenty of debate and headlines. From April 1, purchasers of buy-to-let properties and second homes will have to pay an additional 3% in stamp duty costs. As we've already explored, many industry insiders believe that the prospect of the new system will cause a very busy first few months of the year as landlords look to expand their portfolios before the deadline. It will be interesting to see how the supply of rental homes is affected during the second half of the year once the changes have been implemented.
Housing & Planning Bill
We reported on this Bill back in October when it first came to light. It looks likely that the Bill will be introduced and we should therefore see a national register of criminal landlords and agents as well as bans for those who break the law frequently. There have been a few developments concerning the Housing & Planning Bill during January and we'll be taking a closer look at them next month.
Buy to Let consultation
We recently wrote about the Government's consultation on the buy-to-let mortgage market. This runs until March and it is likely we'll find out later this year whether the Bank of England's Financial Policy Committee will be handed powers to regulate the buy-to-let mortgage market. If this goes ahead, lenders will have to tighten up their lending criteria and some landlords may find it more difficult to expand their portfolios, so this too could have a subsequent effect on the growth of letting agents' stock levels as we move through 2016.
Last year we saw plenty of new selective landlord licensing schemes introduced up and down the country and while there have not been many proposed recently, it's likely one or two will be put forward over the next twelve months. An interesting licensing development that has taken place so far this year, however, is that Ealing Council has recently launched a consultation as it wants to licence some 20,000 rental properties.
As the industry grows, so does the number of letting agents. We've seen some big mergers and acquisitions recently and 2016 will probably be no different. Already this year we've heard news that Linley & Simpson has taken over the rental portfolio of independent agency Here, and Benham & Reeves Residential Lettings has opened its 14th office. Meanwhile, Countrywide has acquired Woods Estate Agents, a Bristol-based agency with five branches, and Connells Group has stated it wants to add six lettings offices to its Barnard Marcus brand this year – and that's all just in January!
Many people thought that 2016 would be the year that interest rates were increased from 0.5% for the first time since 2009. However, we recently learnt that it looks like they may well have to wait until 2017. The Governor of the Bank of England, Mark Carney, said he can't give a precise date on the next interest rate rise but has ruled out an immediate hike due to falling oil prices, China's volatile economy and a slowing of wage growth in the UK. While interest rates remain low, this will boost activity among landlords, although the aforementioned consultation by the Government could well affect the sums lent to landlords in the future.
Supply and demand
Considering all the variables above, it would be fair to presume that the supply and demand of rental property – as it does every year – will fluctuate during 2016, perhaps even a little more so than usual. One thing we can be sure of is that some sort of imbalance between the two will remain. The Association of Residential Letting Agents (ARLA) recently reported that the average letting agent registered 34 new tenants per branch during November, while the average branch had 189 properties managed. Those working in the capital are more likely to be affected by a supply/demand imbalance. In November, for example, the average letting agency managed just 121 properties – 36% lower than the national average.
Growth of rental prices continued apace last year. In fact, we recently reported that in the final three months of 2015, the average UK rental value (excluding London) was £739 per month – some 4.9% higher than the figure recorded the previous year. We also found that average monthly rental values had increased in ten out of twelve UK regions when compared with the end of 2014. Of the UK's major towns and cities, Brighton, Bristol, Edinburgh and Newcastle recorded the highest increase in average monthly rents last year. It's likely that monthly rents charged by landlords will grow again this year – and we've already put together a closer analysis, which you can read here.
Size of the market
The Private Rented Sector (PRS) in the UK is now at its biggest ever size and there is nothing to suggest that it won't stop growing in the next few years – which is, of course, good news for the majority of letting agents. Last year's English Housing Survey declared that in 2013/2014, private renting accounted for more than 19% - around 4.4m – of households and there have been a number of subsequent reports suggesting this proportion of private renters has already increased and is set to rise further. Think tank ResPublica claimed that the PRS now accounts for 22% of all households in the UK, while business firm PwC says that by 2025, one in four households will be part of the PRS and some 59% of 20-39 year-olds will be renting privately.
As the PRS continues to grow, and more landlords and tenants enter the market, the prospects for letting agents once again look extremely positive. So there we have it - ten things to look out for this year. We'll be keeping you up to date with many of these issues via our news pages throughout 2016.