A huge vote of confidence in the lettings market
A major acquisition of three big brands in the lettings market signals buy to let is not dead, but consolidation is on its way, says Adam Walker.
The recent sales of Stirling Ackroyd, Alexander & Co and Chestertons represents a huge vote of confidence in the UK lettings 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.
Enormous market
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.
Within five to 10 years, the lettings market will be dominated by a small number of mega businesses.”
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 five to 10 years, the lettings market will be dominated by a small number of mega businesses with independent agents becoming increasingly rare.
If I am right, I may 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.
