With our new Chancellor of the Exchequer revealing a ban on tenant fees in his first Autumn Statement on Wednesday what does this actually mean for Canary Wharf tenants and Canary Wharf landlords?
The private rental sector in Canary Wharf is an important part of the Canary Wharf housing market and the engagement from the chancellor in Wednesday’s Autumn Statement is a welcome sign that it is recognised as such. I have long supported the regulation of lettings and estate agents. This will ensconce and cement best practice across the property industry. I believe that measures to improve the situation of tenants should be introduced in a way that supports the growing professionalism of the sector. Over the last few years, there has been an increasing number of regulations and legislation governing private renting and it is important that the role of qualified, well trained and regulated lettings agents is understood.
Great news for Canary Wharf tenants.
So, tenants, this is great news isn’t it? Well before you all crack open the Champers, read this;
Although I can see prohibiting letting agent fees being welcomed by Canary Wharf tenants, at least in the short term, they won’t realise that it will rebound back on them.
Firstly, it will take between 12 and 18 months to ban fees, as consultation needs to take place. Then it will take an Act of Parliament to implement the change. A prohibition on agent fees may preclude tenants from receiving an invoice at the start of the tenancy, but the unescapable outcome will be an increase in the proportion of costs which will be met by landlords, which may, in turn, be passed on to tenants through higher rents.
Published at the same time as the Autumn Statement, hidden in the Office for Budget Responsibility’s Economic and Fiscal Outlook on the Autumn Statement (The Office for Budget Responsibility being created by Government in 2010 to provide independent and authoritative analysis of the UK’s public finances), it said on Wednesday:
“The Government has also announced its intention to ban additional fees charged by private letting agents. Specific details about timing and implementation remain outstanding, so we have not adjusted our forecast. Nevertheless, it is possible that a ban on fees would be passed through to higher private rents”
The charity Shelter and Scotland.
Scotland banned Letting Fees in 2012. The charity Shelter have been a big voice in persuading and lobbying the Government since it managed to persuade the Scottish Parliament to ban fees in 2012. On all the TV and radio shows at the moment, they keep talking about their Independent Research, which they said showed that,
“renters, landlords and the industry as a whole had benefited from banning fees to renters in Scotland. It found that any negative side-effects of clarifying the ban on fees to renters in Scotland have been minimal for letting agencies, landlords and renters, and the sector remains healthy.”
“Many industry insiders had predicted that abolishing fees would impact on rents for tenants, but our research show that this hasn’t been the case. The evidence showed that landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK. It found that where rents had risen more in Scotland than in other comparable parts of the UK in 2013, it was explained by economic factors and not related to the clarification of the law on letting fees”
As my regular readers know, I believe the devil often lies in the detail….
Only yesterday Shelter were quoting this research from December 2013 to say rents never went up following the tenant fee ban in Q4 2012. I have read that research and I agree with that research. However, it was published three years ago, only 12 months after the ban was put into place.
I find it strange they don’t seem to mention what has happened to rents in Scotland in 2014, 2015 and 2016. Perhaps that is because that tells us a completely different story.
So, what really happened in Scotland to rents?
I have carried out my research up to the end of Q3 2016 and this is the evidence I have found:
In Scotland, rents have risen, according the CityLets Index,
by 15.3% between Q4 2012 and today
(CityLets being the equivalent of Rightmove North of the Border – so they know their onions and have plenty of comparable evidence to back up their numbers).
When I compared the same time frame, using Office of National Statistics figures for the English Regions between 2012 and 2016, this is what has happened to rents
· North East 2.17% increase
· North West 2.43% increase
· Yorkshire and The Humber 3.21% increase
· East Midlands 5.92% increase
· West Midlands 5.52% increase
· East of England 7.07% increase
· South West 5.82% increase
· South East 8.26% increase
· London 10.55% increase
Remember Scotland has seen a 15.3% increase!
Are you really telling me the Scottish economy has outstripped London’s over the last 4 years? Is anyone suggesting Scottish wages and the Scottish Economy have boomed to such an extent in the last 4 years that they are now the Powerhouse of the UK? If they had, Nicola Sturgeon would have driven down the A1 within a blink of an eye, to demand immediate independence.
In the next part of this article, I will examine what this means for the Canary Wharf property market in the future. To read that, simply subscribe using the button at the top right hand side of this page.
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Thanks for reading.
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