HOW THE TENANT TAX AFFECTS
Initially Letting Agents may see the change in tax as a good thing because it will force rents up. In most cases they earn a fixed percentage of the rents collected, so they’ll see an increase in their profit. Unfortunately they might also have to deal with an increasing amount of tenant complaints due to maintenance budgets being squeezed.
With rents increasing, it is likely, that rent arrears will rise too.
However the longer term consequences are likely to put many agents out of business. In the first instance Landlords will perhaps question whether they can afford to continue paying the agent’s fees (+ VAT) and consider taking the properties under their own management.
Many Landlords will be forced to sell their properties or they may be repossessed, leaving the agent with much reduced stock, and therefore income.
Estate Agents will initially be affected by the serious downturn in the Buy-To-Let Market. Currently 15% of mortgage approvals are for BTL’s and this market is set to disappear. That will lead to the House Builders scaling back production thus there will be far fewer new-builds to market.
When Landlords start off-loading properties it’s possible that prices will drop, particularly in areas where there is a high percentage of rental houses. We could enter another period of downwardly spiralling house prices resulting in some offices or complete chains of agents disappearing. Whilst we don’t think that prices will fall far, it could be too far for some.
The effects of George Osborne’s tax changes are already being felt in London and agents there are complaining that he has killed the market. What happens to London property often causes ripples outwards.