Large number of UK landlords will stop using letting agents if costs increase

Almost half of landlords in the UK would ditch their letting agent if their profits began to fall, according to a new survey carried out a time when they are coping with considerable change in the sector.

Overall some 47% say they would forego the services of their letting agent with landlords in Scotland, the East of England and the South East most likely to do so.

But landlords in the West Midlands and the South West are most likely to stick with an agent, according to the research from the UK Association of Letting Agents (UKALA).

The research was undertaken to assess what impact the forthcoming changes to landlord tax from April next year could have on agents’ businesses and the National Landlords Association (NLA) has already warned that more than 400,000 landlords will be pushed up a tax bracket as a result of the changes, potentially forcing them to revaluate the need to employ the services of an agent.

The news will come as another blow to agents, after the recently announced ban on tenant fees could force many to increase charges to their landlord clients in order to cover their costs.

The findings show that in the UK 57% of landlords, approximately 1.1 million, say they employ the services of a letting agent with 36% describing themselves as regular users and 21% occasional users.

Regionally, some 56% of landlords in Scotland would ditch their agent if their profits were compromised, the highest number in the UK but just 29% would do so in the West Midlands, the lowest across the UK.

The findings also show that 26% of landlords who use letting agents to exclusively fully manage all of their properties would cut them loose in the face of diminishing profits. This drops to 21% of landlords who use agents on a let only basis for all their properties.

The research also found that 36% of landlords would retain the services of their agent even if their profits were compromised.

‘A significant number of landlords will be hit hard by the tax changes and agents’ fees will be one of the items underneath the magnifying glass if profits begin to decrease,’ said Richard Price, UKALA executive director.

‘As landlords’ costs inevitably rise, agents will need to do more to position themselves as indispensable, and make it obvious that they provide solid value for money. Otherwise, as future tenancies come to an end, landlords will either shop around or start to consider self-managing their properties,’ he added.

According to Richard Lambert, chief executive of the NLA, landlords should already be looking ahead to the forthcoming tax changes and working out how they will be able to maintain profitability. ‘That will intensify with the prospect of agents’ fees increasing as a result of the ban on charging tenants,’ he said.

‘However, while it may seem an appealing proposition to minimise your outgoings, the majority of landlords simply won’t have the resources to deliver a service that meets the standards or professionalism that their agent currently provides,’ he added.