While there have been moves to help first-time buyers afford the up-front costs associated with buying property, the reaction to assisting tenants deal with up-front costs has been slower. Yes, the amount of money required to obtain a mortgage is large and prohibitive, which is why there is assistance available for people looking to raise a deposit. However, there are a number of costs that tenants have to pay before they can move into property and it doesn’t look as though these will change until 2019.
At this point in time, tenants are faced with initial costs like:
· First month’s rent
· Deposit, which could reach two month’s rent
· Letting fees
· Removal costs
Having to pay all of these costs around the same time-frame may put many people off of looking for rental accommodation. Depending on the location and size of property, the cost of the initial month’s rent and the deposit could run into thousands. Also, while the average letting fee stands at around £223 in the UK, there has been anecdotal evidence of tenants having to pay £1,000 in letting fees. With so many fees to pay, it is understandable that tenants struggle and that the thought of having to move property is a concerning one for them.
There is good news in the fact that the Government aims to outlaw letting fees. There is further good news in the fact that it is likely that a cap will be placed on how much of a deposit can be asked for. While these aspects are positive news for tenants, the bad news comes with the fact that these changes are unlikely to come into effect until spring of 2019. Anyone looking to rent property in 2018 will find that they don’t receive any support with up-front costs.
When these changes are implemented, it is likely that there will be an impact on the lettings market. With fewer fees to consider, it is likely that more tenants will feel confident about making a move. With suggestions that the Government may back moves to offer longer tenancies for tenants, there could be some optimism for tenants in the rental market in the years that lie ahead.
Of course, the nature of the letting market means that good news for one party is bad news for another. The removal of letting fees may see some agents decide it is not worth operating or they may look to recoup the money from these fees in different ways. It is not as though landlords benefit from additional income in collecting a deposit, but the size of deposit may provide a landlord with confidence about the type of tenant they allow into their property. A smaller deposit may see some landlords decide against certain tenants gaining access to their property.
There is no denying that reducing costs for tenants is a positive move and it can only be hoped that this will invigorate more people in the rental market. However, as with most things when it comes to property, there are two sides to everything and it may be that these changes will bring about some negative reactions in the letting market.
Therefore, there is a need to stay in touch with these developments, which is when you should call on Gareth James. If you have an interest in the lettings market in London, we are the agents you should call on.