Research by a leading property software company has estimated that letting agents will lose £400 in lost fees per new let in London, substantially more than previous industry and government estimates for the overall market following the tenant fees ban.
Hertfordshire-based company ARPM claims letting agents in the capital also face several key challenges including tenancies that are getting longer as Generation Rent stays put, and that too many agents are relying on let-only rather than fully-managed tenancies to run their businesses.
“In a fluid market where lets were often six months, tenant mobility was high and tenant fees could be charged, this was a plausible business strategy,” says ARPM’s Managing Director Simon Duce (left).
“Now that the market is slowing down and fees have been abolished, it’s a much less financially secure model to follow.”
ARPM says in its research report that the tenant fees ban means this strategy, which many agents chase in a bid to grab market share via low fees to landlords, is flawed and that letting agents should focus more on full property management.
The report, which has been drawn up by property expert Kate Faulkner, says a let-only approach creates inconsistent cashflow and a lower valuation for a business that is put up for sale compared to those which have signed landlords to fully-managed contracts.
“The property market is changing, and while many letting agents may conclude that it’s not a great time for their business, I believe the opposite is true,” says Faulkner.
“What this report highlights is the great opportunity available in property management which can improve financials for agents, protect landlords and raise property standards for tenants.”
Read more about the tenant fees ban.