A Huge Vote Of Confidence In The Letting Market
The recent sales of Stirling Ackroyd, Chestertons and Alexander & Co represents a huge vote of confidence in the UK letting market. Despite endless articles about the decline of the buy to let market, it seems that a private equity fund and a large European property conglomerate still have enough confidence in the sector to spend a nine figure sum on three large acquisitions and I believe that this confidence is fully justified.
Whilst over 200,000 buy to let properties were sold in 2023, most of these sellers had bought their properties quite recently and had large mortgages on them. Many were forced to sell because their mortgage payments tripled after Liz Truss’s disastrous budget.
However, landlords who have owned their properties for longer bought their properties at much lower prices and have smaller mortgages or own their properties outright. These landlords are much less likely to sell because, if they did, they would incur a huge capital gains tax bill.
Despite the recent disposals, the size of the buy to let market in the UK is still enormous. According to HMRC 2.79 million landlords filed self-assessment tax returns in the tax year 2021 /2022 which showed that they earned £48.8 billion from property investments. And this figure excludes all the landlords who operate through limited companies.
Against this backdrop the loss of 200,000 properties, whilst a tragedy for every tenant that was made homeless, hardly spells the end of the BTL sector.
My expectation, therefore is that the consolidation of the letting industry will continue unabated. We are still dealing with record numbers of business sales and our clients are achieving record prices for good quality managed letting businesses and portfolios.
The pace of the consolidation is so rapid that I would forecast that within 5 to 10 years, the letting sector will be dominated by a small number of mega businesses, with independent agents becoming increasingly rare.
If I am right, I will have to find a new way to earn my living. I will be in my seventies by then but I still enjoy what I do and have no wish to retire. I may therefore have to start thinking about the next industry sector that is likely to consolidate.
Adam Walker is a business sales broker who has worked in the property sector for over 40 years.