It’s one thing capping the commission that letting agents can charge at £500 and, in all honesty, is something I have no problem with given what we charge (£199 as a referencing fee).

But tomorrow (Thursday), wannabe Premier Ed Miliband will announce that he will cap rent increases if elected.

Two problems with this. Big ones.

First, how will it be enforced, by whom and at what cost to the wider tax payer?

Second, think about the unintended consequence of capping rents at an artificial level and, forgetting the political dogma for a second, what it will do to the supply of rental properties.

Because as house prices rise, particularly in London, the yield/return that a buy to let investor will get will reduce. Currently, rents are worked out on demand but, linked to market value of the property itself.

If property prices rise but rents stay relatively low, the gap widens and the yield goes down. Which will mean that people will STOP buying properties to let and the supply will dilute and many people will have nowhere to live.

 Someone tell Ed please

 

Written by our wise (and opinionated) CEO Russell Quirk. We don’t all agree with his opinions all of the time (but don’t tell him)

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