Letting agents are increasingly looking to tech solutions to ease their concerns about compliance with strict rules of handling client money, according to a new survey by PayProp.
Compulsory client money protection (CMP) rules were brought in for English agencies by the government in April 2019 and valid CMP insurance is a legal requirement in Scotland and Wales as well. They apply to any agent that handles client money.
The prospect of hefty fines for any breach of the complex rules in place has clearly had an impact on letting agents, as the survey shows.
In our latest Rental Confidence Index, we asked agents to provide insights and opinions on technology and automation.
More than 80% listed the safety of client funds as one of the most important consideration when selecting a tech solution. This was followed by system security and functionality, which is par for the course for letting agents who are worried about client accounting.
And when given the opportunity to air their views on the benefits of technology, the majority of respondents said they believe that increasing automation is both more productive (64.6% agree or strongly agree) and cheaper (65.1% agree or strongly agree) than increasing the workforce.
The survey also revealed that agents view property technology as a worthwhile investment with 80.7% of respondents either agreeing or strongly agreeing.
In addition, 68.4% of respondents were positive or very positive about the ongoing impact of automation on their job over the next five years.
Managing director of PayProp UK, Neil Cobbold, said:
“With more rule changes and legislation coming down the track this year for the PRS, the benefits of being able to automate labour-intensive tasks such as banking and compliance have clearly been noted by property professionals who are trying to maximise efficiency while reducing costs.”
Perhaps unsurprisingly, the survey saw a significant rise in the number of property professionals who implemented higher-than-usual rental increases in 2022 (72%). This was up from 56.6% in 2021.
The reasons for this probably include higher landlord costs due to inflation and strong competition for available stock increasing market rates.
Despite these rises, there was no corresponding increase in arrears reported. In fact, 4.5% fewer respondents saw higher-than-usual arrears in 2022 than in 2021.
And the number of vacant properties were down too, with over 70% reporting lower-than-usual vacancies. Indicative of the high demand for rental homes, almost 40% of reported vacancies were snapped up by new tenants in less than a week of being on the market.
But despite strong tenant demand and high rents, the survey revealed that more landlords want to sell their properties (49%) than the ones adding to their portfolios (13.2%).
For their part, property professionals identified ‘signing more landlords’ as their main priority (40.6%), followed by ‘finding more ways to generate income (21.3%) and ‘improving the customer experience’ (12.9%).
Linked to this, ‘finding new rental properties’ was the most challenging aspect of lettings for 42% of respondents – again, the highest score.
Cobbold said: “This suggests that competition for rental properties is high and that agents need to be creative and proactive in their search for new properties at a time when a high proportion of landlords are reportedly selling up.
“Two standouts that rank low on the list of worries in 2023 were finding tenants and competition, suggesting that the majority of those surveyed are confident they can attract landlords away from self-management and the competition.”
Cobbold concludes that agents can expect more of the same troubles from 2022 to persist in 2023.
Low stock availability continues to be an issue and inflation remains stubbornly high. But there are reasons to be positive.
“Data shows that the sales market is enjoying a revival. Rent controls in Scotland are easing and there are signs that Westminster is considering a variety of perspectives to ensure a more balanced reform of the English private rented sector. With inflation predicted to be half of what it is today by the end of 2023, plus better prospects for rental and commission growth, letting agents can look forward to a more positive second half of the year.”