The sale of Henry Adams

The sale of Henry Adams which completed on the 1st of September is very significant. The reason is that the majority of its income comes from residential sales not residential lettings. Until recently it was very difficult to sell a business that earned less than half its income from lettings but the market for sales businesses seems to be recovering at last.

I think the reason for this is that the buyers have decided that the residential sales market can’t get any worse. A buyer’s greatest fear is that they buy a sales business that is turning over £1,000,000 a year with a £200,000 profit only to find that a few weeks later there is a downturn in the housing market. This could be caused by an increase in interest rates, a tax change or a major political event. I  have seen this happen many times before over the years. When an event like this occurs, confidence in the housing market evaporates and the market falls off a cliff.  It is almost impossible to cut the running costs of the business quickly enough to avoid making a huge loss.  Before you know it a £200,000 profit has turned into a £200,000 loss which of course has to be subsidised by the buyer.

Letting income on the other hand is much more stable. Even during COVID, when lots of people could not even live in the properties that they had rented, they still carried on paying the rent and the agents continued to receive their management fees. This is why there is always a good market for letting businesses.  Sales businesses on the other hand only sell for good money for two or three years in every market cycle.

One  swallow does not make a summer.  However, I am finding that buyers are now at last taking a much more positive view about buying a sales business and this is likely to lead to a long-awaited recovery in prices and transaction levels.

Adam Walker is a business sales broker who has specialised in the property sector for more than 35 years.