Letting agents must batten down their hatches and start streamlining in the face of further debilitating changes to the lettings industry.
A report published this week by ARLA Propertymark, in collaboration with consultancy firm Capital Economics, has further consolidated existing fears that the government ban on letting fees will result in shockwaves across the entire lettings sector, affecting everyone from tenant to landlord to property manager.
There may be trouble ahead...
What's in store for the lettings sector?
The report states that at present, letting agency fees are estimated to make up a fifth of an agency’s total revenue. However, if banned completely, it is likely that agents will pass 75% of this cost onto the landlord. Facing higher costs, it is predicted that 8% fewer landlords will choose to use letting agencies to manage their properties, with 7% choosing to spend less on property maintenance altogether. As a result of this, 6/10 agents surveyed, believe that both management and rental conditions will decline due to the cutting of key services such as tenant referencing and credit checks.
ARLA Propertymark estimates the total loss of earnings to letting agents to be £0.2 billion.
This shocking figure combined with the recent government policy debacle on national insurance contributions for the self-employed demonstrates how precarious the situation in the Private Rented Sector is.
Had Chancellor Hammond’s proposed two percent increase on NI contributions went ahead, the army of contractors that letting agents and property managers rely on for maintenance would have been another party who faced the hardest hit.
These changes highlight the importance of streamlining business and identifying new revenue streams to survive in a hostile market.
Identify new revenue streams
The government’s steady profit erosion of the property sector means letting agents will have to get creative if they want to continue making a profit. Luckily they’re sitting on a very valuable resource: data. As Eurolink managing director Nigel Poole puts it:
“Perhaps the best solution is for agents to focus on the opportunities that a ban will create. Using their own client data to generate substantial new revenue streams from third-party providers is a case in point.” 
Expand services and consider profitable partnerships
Letting agents should consider adding additional services, like legal fees or accounting services, to their portfolio. Making themselves a one-stop shop for landlords is an effective way to ensure client retention, as well as increase profits. On the tenant side, consider creating new partnerships with facilities providers. Offering dry cleaning, internet and advanced maintenance services as part of the rental package, is another way to increase profit and maximise appeal.
Employing automated software to manage the more menial aspects of the job frees up staff to concentrate on implementing innovations, servicing clients and winning new business. Fixflo can now send automated reminders to contractors to schedule routine maintenance, contact insurers for approval and update tenants as to progress, all at the click of a button.
Start your free Fixflo trial today by clicking here.
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