The upcoming ban on tenant fees, set to come into force on 1 June, could help traditional letting agents to remain on the high street, according to leading PropTech provider PayProp.
Although the ban will have an impact on the revenue agents can generate, it could reduce competition from agents who have been subsidising rock-bottom management fees with revenue from tenant fees. This will remove a major differentiator for these firms, putting all agencies on a more equal footing with regard to the total fees they charge.
A more level playing field for high street letting agents
In recent months, there has been a trend of agency branches closing as businesses look to cut costs and consolidate. According to figures from the Local Data Company, 211 agency branch offices closed in the first half of 2018.
However, this needn’t be the fate that befalls high street letting agents, according to Neil Cobbold, PayProp UK’s chief operating officer.
Cobbold said, “The ban on fees, while representing a clear bump in the road for letting agencies – could indirectly help businesses to stand firm on the high street.
“With many agencies expected to increase management fees as a consequence of the ban, those charging the lowest fees will have to raise their prices, reducing the gap between the top and bottom end of the market.
“With a more level playing field in terms of management fees, high street letting agents providing first-class property management will be able to thrive.”
Landlords will be prepared to pay for quality
As average management costs are likely to increase following the fees ban, landlords will be on the lookout for the best service and increasingly prepared to pay for quality.
Cobbold said, “As costs rise and value for money becomes more important, a letting agency which is on top of crucial issues such as payments, rent arrears and property maintenance will become more indispensable than ever to landlords.”
The best agents will already be ready for change
Despite the June start date for the tenant fees ban only recently being revealed, the top-performing agents will have been prepared for this significant market shift for some time now.
Cobbold added, “Of course, agents need to cut costs accordingly to replace lost revenue, but that doesn’t mean they necessarily have to reconsider their high street presence.
“As well as pursuing alternative revenue streams, the best-prepared agencies will be using PropTech to their advantage, helping them to be more efficient and offer a more streamlined and effective service to landlords.”
“The landscape of the rental sector will change considerably this year, but there remains a whole host of opportunities for savvy high street letting agents to remain profitable and grow their businesses.”