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Fewer up-front costs could kick-start market, says tenant referencing firm

The trend towards reducing or eliminating deposits at the same time as edging towards a ban on letting agents’ fees on tenants could benefit all parties in the lettings sector, a tenant referencing firm suggests.

FCC Paragon says that if tenants continue to have a reducing number of barriers to moving, this could kickstart buy to let and renew the lettings market. 

“Landlords have been discouraged from investing in property due to controversial tax changes and the introduction of a stamp duty surcharge,” says Bryn Cole, Managing Director of FCC Paragon.

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“If tenants are incentivised to move and the private rental sector gets a boost, this could encourage landlords to think about expanding their portfolios again.”

There could also be wider benefits for the housing industry, Cole suggests.

“If tenants have more money to save, combined with the recent stamp duty cut, this could help to shape the next generation of first-time buyers and subsequently contribute towards fixing the 'broken' housing market that the government is desperate to fix,” says Cole.

Now that it has been confirmed that the ban on agents’ fees won't be introduced until spring 2019 at the earliest, FCC Paragon says agents have time to prepare - but they must act quickly.

“Alternative products, like deposit-free options, which complement the fees ban and improve affordability for tenants could be one way forward for agents” says Cole.

“Come 2019 when fees are banned, agents will need to recoup lost revenue and therefore they need to explore various different options and determine what approach best suits the needs of their business.”

FCC Paragon says that in the wake of the fees ban and changing attitudes towards renting, tenants, landlords and letting agents must start to consider alternatives.

“With an increasingly transient population – many of whom can't afford substantial deposits – it may not always be suitable to side with the norm and take the traditional, expected route,” says Cole.

“There is estimated to be almost six million households privately renting by the end of 2021 and with the sector growing so rapidly, there is an increasing need to provide different solutions which cater to tenants’ varying needs.”

According to FCC Paragon - which has a product offering an insurance-based alternative to a large upfront deposit - one of the biggest obstacles for tenants looking to relocate is having to wait for their previous deposit to be released. 

This can have a subsequent impact on their chances of being able to afford the deposit for their next rental home. It could, in turn, have a knock-on effect of more unwanted void periods for agents and their landlords.

  • Kristjan Byfield

    The things putting off Landlord investors is not demand but the taxation and regulation changes being imposed on them. The rental market is bigger than it has ever been and this trend is set to continue indefinitely as more and more areas become unaffordable to first time buyers. Whilst upfront costs may delay how quickly a tenant can get on the rental ladder I dont think we can say that the lettings market needs 'kick-starting'. We did our largest amount of new business to date in 2017 and we have started 2018 with our best ever January.

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