Most landlords don’t use letting agents to manage their properties. In fact, it is an astonishingly small proportion – just 18pc – who use an agent for management services, according to the English Private Landlord Survey 2021.
But what is perhaps more surprising is, despite these market statistics, estate agencies are booming, with ever-increasing numbers opening every year.
I’m what you’d call a “hybrid landlord”. I self-manage, and I also use letting agents to help me run my portfolio. With properties across the country and high standards of service, I know I cannot manage all of my tenants alone, and so I have no issue having help.
I am also not ashamed to admit I cannot do it all; in fact I don’t want to. And for what it’s worth, I believe my tenants are better off for it.
Although, that’s not always the case.
The first agent I sacked, I likely should’ve sacked sooner. However, given the property was miles away from me and it was an outlier to the rest, I didn’t have such a strong network of contractors.
The death knell sounded when they sent me the six-month property inspection and said everything was fine. I checked the photos attached, and my eyeballs spun at the kaleidoscope of colours my lovely house had been painted in.
“WTAF?” Was my terse reply. “Have you checked the move-in inventory before saying everything was okay? This property was fully painted white?”
Cue a barrage of apologies and promises to talk with the tenants about reinstating the property when they left.
Then the shed door lock broke and a repair was needed. I was quoted £278, plus VAT.
“It’s a replacement door lock for a shed, not a replacement shed,” I said.
“Yes,” they said, “that’s the quote.”
Over the next couple of weeks more insane prices came my way for everything from removing a bush that had blown over (£550 plus VAT) to replacing a bathroom light switch cord (£178 plus VAT). Every time I found myself sourcing an alternative contractor who did the job at a fraction of the price.
It was needing a new boiler that broke me. The quote they obtained was in excess of £5,000, yet when I called a trusted plumber, he quoted me just £2,100. I called the boss of the agency and shared my dissatisfaction.
I said there was no trust left and I could no longer have an agent managing my property who did so only to line their own pockets. I was likely out of line, but the proof was in their quotes versus the actual invoices I’d paid.
“Your agreement says you have to give us three months’ notice,” he said.
“That’s okay,” I replied. “I’ll file a complaint with the Ombudsman. I’ll let it know about the inventory and I’ll send all the inflated quotes you’ve sent me and the actual invoices I’ve paid when I’ve sourced contractors myself.”
Unsurprisingly, the agency agreement was terminated immediately.
The past 12 months has been a rocky time for house prices. The personal finances of many buyers and sellers have come under great strain from rapidly rising interest rates and inflation. Global inflation hit 8.7pc in 2022 dropping to 6.9pc in 2023, according to the World Bank.
At the same time concern about climate change is pushing governments to introduce increasing amounts of regulation in order to improve the energy efficiency of buildings and reduce people’s power usage.
Caught between these two pressures, house prices are being forced downward – and Germany’s property market is a leading example of this dynamic at work.
Prices of houses with low environmental ratings in Germany are falling faster than those with better ratings, because buyers expect net zero regulation will become even tighter. Analysts expect the gap in house prices to continue widening.
Franziska Marie Biehl, economist at Dutch bank ING, said: “Prices for properties with lower energy labels have fallen more significantly than prices for those with a good energy label.
“In our view, prices for old buildings in need of renovation are likely to drop even sharper than the current market environment would already suggest, widening the gap.”
In 2023 the price of a home with an energy label H was on average 45pc lower than that of a residential property with an A+ energy label.
Only 3pc of current German housing stock has been built since 2011 and is therefore likely to need renovation in the coming years, reducing its value.
A survey by estate agent McMakler in 2021 found that 10pc of properties built before 1979 are classified as A, A+ or B. For residential properties built after 2010, the share is more than 70pc.
Refurbishments to improve energy efficiency cost between €400 and €600 per square metre on average, leading many homeowners to opt to sell rather than renovate.
Concerns around regulation are to blame for a fall in buyer demand, says Michael Heming, managing director of Heming Immobilien estate agency.
“People are very worried because they could be paying €300,000 to €400,000 to buy a house, and then have to install heat pumps that they cannot afford.”
Much of the concern is thanks to the Building Energy Act amendments that were passed by parliament in autumn last year. While the legislation has been watered down and has been challenged in court on the basis of procedure, it is going ahead.
Under rules introduced on Jan 1 this year, every new heating system installed in new developments in Germany must now use at least 65pc renewable energy.
For existing buildings, the requirement will come in from January 2026 or 2028, depending on the size of the municipality.
Is the UK also at risk?
The UK could face a similar reckoning. The majority of buildings here are rated D or above, and while Rishi Sunak backtracked on his requirement for buy-to-lets to be C or above by 2028, there is no word yet on what a Labour government would require.
There have been warnings that the requirement for C grade properties could “implode the sector”.
Hamptons estate agents estimates that the total cost to upgrade England’s existing rental stock to band C would be £16bn. This would be equivalent to almost half a year’s rental income.
Rents aren't unaffordable; young people just don't want to work
Two major events in recent memory have contributed to the sense that the current generation of young people have had their life chances stolen from them.
The first is the credit crunch and associated financial crisis of 2008, the consequences of which, even now, have yet to be appreciated. When young couples have their application for an affordable mortgage rejected by their bank, the seeds of that decision all too often seem to trace back to the collapse of Lehman Brothers in the United States and the subsequent exposure of the appalling mismanagement of their own organisations by bankers across the world.
The second cause of grief for the living standards and aspirations of the current generation is, of course, the Covid pandemic. Social historians of the future will have their work cut out for them as they seek to reconcile the enthusiasm with which the public demanded the shut down of the economy and the previously unimaginable scale of state support to be paid out to employees for work not done, and the subsequent outrage at the fall in productivity and anaemic wage growth that followed, as if the two factors were entirely unconnected.
Whatever the causes of the current discontent, the despair of Generation Z at the throttling of their aspirations is a palpable political reality, and one with which current and future governments must deal. Young workers face the prospect of not being able to buy their own homes until well into their thirties, or even forties, unless they can rely upon generous handouts from wealthy parents, further institutionalising the disparity between this country’s haves and have-nots. With growth in rents set to outstrip wages for the next three years, the issue will only become more salient.
But the answers to this dilemma from those directly affected fall far short of economic reality. Of course higher wages for less work would suit many; when has such a prospect not been popular? But as the pandemic proved in painful detail, such solutions, while having a short-term attraction, can only store up massive – perhaps insurmountable – problems for the future.
Even the civil service, the backbone of the British establishment, is responding to the long-term economic impact of lockdown by demanding the same pay for 20 per cent fewer hours worked – an indication, were cynical ministers to exploit the claim, that the service is significantly over-staffed with far more employees than the workload might justify.
Unless some top secret economic theory has been unearthed that turns financial orthodoxy on its head and promises extra productivity in exchange for less work and higher, unaffordable wages, the only apparent solution to the current crisis facing people in their twenties seems to me to be for the economy to grow at a far faster rate than has occurred in the last decade, for consumer demand to mirror that growth and for lending institutions to begin to take risks on mortgages.
It might be remembered that the current expectation of home ownership after securing your first job was not a reality for many when the current generation of boomers and Generation X were children. The vast expansion of private home ownership and associated prosperity of the ’80s and ’90s did not come about because of workers’ rights, but because of free market economic policies that freed up the jobs and the financial markets.
If solutions to the current challenges exist, they do not exist in repeating the follies of the dim or recent past: 1970s corporatism and economic lockdowns served only to store up misery for the many. As former chancellor Denis Healey once said, when in a hole, stop digging. A generation reared on positive affirmation from their parents, who were authoritatively assured by them that everything they said, did or painted was marvellous, can no longer rely on other people – particularly the older generation – to solve their problems for them. There is no deus ex machina waiting to swoop to their rescue.
Today’s problems are not new; previous generations faced the same dilemmas, and they suffered a long, difficult road on the way to salvation. The chief difference is that too many of the current generation seem to believe they are so special that they can rely on the magnanimity of the state and their employers to come to the rescue.
A rude awakening awaits.
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