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Phil Spencer – why sales-only agencies should get into lettings

There’s one message that’s come home to me loud and clear from my dealings with agents so far this year - the remarkable shortage of stock on the market.

I’m acutely aware that while that’s been the reason for higher sale prices, and it’s meant that many homes have been snapped up unusually quickly, it’s also been a real hardship for those agents who rely on volume to keep their bottom lines healthy.

After low inventories for over 18 months now, it seems particularly unfortunate that other factors - the cost of living crisis and soaring energy bills - may be the key elements in the second half of this year that will stop the volume of sales returning to pre-pandemic norms.


So I was struck by a recent piece of research by the new portal Boomin analysing data from agencies themselves, and suggesting that 53 per cent of the industry’s income is derived from sales and a fast-rising 47 per cent from lettings.

You’re probably ahead of me now but my point is this - if agencies dedicated solely to sales are struggling, why not widen business opportunities by having a lettings division?

“Lettings creates a huge additional financial opportunity for sales-only agents as house prices and deposits become further out of reach” says Boomin - and I can only agree.

But aren’t landlords selling up?

There’s been a lot of media attention about landlords selling up, and some are doing so because taxes and regulations have made letting less profitable and more complicated.

But there are signs that the landlord sell-off may be slowing. Estate agency Hamptons says the share of homes sold by investors across the market - not just through its own company - fell from 14 per cent in 2021 to 10 per cent in Q1 2022, the lowest proportion in 10 years.

And likewise, some new ones are moving in.

Landlords purchased more homes than they sold in the first three months of 2022 according to Hamptons. In fact they purchased 13.9 per cent of homes sold across Great Britain between New Year and the end of March, which is the highest proportion since 2016.

And amongst many landlords - old and new - the appeal of a lettings agency taking over the management hassle of buy to let is more tempting than in the past.

That’s why many of the country’s largest agency chains - for example Foxtons, Belvoir, Hunters and others - have all been working hard to increase the size of their lettings divisions and the numbers of properties they have ‘under management’.

Renting sector complexity is exactly the reason to get stuck in

Agents I’ve spoken with point out, with good reason, that setting up a lettings department is complex and costly.

They’re right, of course. The National Residential Landlords Association calculates there are 150 laws about private renting, so no one should underestimate the task of keeping across that legal minefield as well as marketing, finding tenants and managing properties.

But it’s that very complexity that makes letting agents so valuable.

For while go-it-alone landlords managing their own properties are finding it tougher than before to keep up with legislation (including new energy efficiency rules now being considered by the government), letting agents are reporting increased numbers of landlords asking for their expert help.

The significant majority of landlords own just one or two properties and are, in the best sense of the word, ‘amateurs’. Unsurprisingly many now rely (and pay for) the expertise of agents, who in turn enjoy referral fees by up-selling services such as inventories, insurance, tenant referencing and much more.

The long-term justification for going into lettings

The reason why buy to let remains attractive, despite growing red tape and the prospect of even more regulation to come, is simply that demand for rental homes is growing and fast.

From 2.0 million at the Millennium, the number of privately renting households reached 4.43 million in 2021 - overtaking social housing in the process. In parts of London the share of housing stock given over to private renting is approaching 40 per cent.

As the sector grows, so demands for it to professionalise are also growing.

Some of those demands are from institutional investors who fund and manage purpose-made Build To Rent properties, which can make ‘old school’ buy to let landlords appear distinctly less appealing without the professional assistance of expert agents.

The government stated just last month that in the coming Parliamentary year it would be introducing far-reaching reforms of the private rental sector to modernise evictions, apply a ‘Decent Homes Standard’ to properties, and introduce an Ombudsman for tenants.

This will drive far more amateur landlords into the hands of agents who offer lettings services as the complexity rises and more professional advice is required.

The big boys don’t need telling

The corporates don’t need persuading about the merits of working in lettings. A decade ago many had no involvement at all but now many derive more income from lettings than from sales.

Smaller agencies can learn from this playbook: no one is saying a move into renting will be easy, but long-term it is looking like a sound move. Don’t let it pass you by…

*Phil Spencer is a presenter, author, businessman and property investor. Phil’s consumer advice platform Move iQ, is a website, YouTube channel and podcast. Each preserve and reflect the same impartiality that consumers trust and base their property moving plans. Phil’s Move iQ Pro, is coming in 2022! It will connect select property professionals with Move iQ’s consumer audience. If you’re interested in hearing more subscribe here.

  • Chris Arnold

    Disagree - agencies should focus on their strength. Not attempt to overcome a perceived weakness by entering already established sectors that are seemingly well served.
    If the availability of stock decreases, the solution is to focus on better clients, not to diversify.
    Don't believe everything Boomin tells you, Phil.

  • icon
    • S S
    • 10 June 2022 10:18 AM

    Lettings is a different business to Sales - if you're good at one, you don't necessarily and knowledge have the skills for the other. Our Lettings/Property Management staff have completely different personalities to our Sales Team.

    Property Management is a business where you deal with problems every day 24hrs a day. Sales can switch off at the weekend but if a pipe bursts at 5.30pm on a friday, a letting agent can't walk out of the door or if an elderly tenant is found deceased on a sunday morning, a letting agent should deal with it. In an industry where anyone can set up as a letting agent - I have first hand knowledge of agent not being available when actually needed, unfortunately they often tend to be charmers (hence great at sales) so the LL nevers knows just how bad the service they get is. And once they trap a LL, most one-off and inexperienced LL just feel stuck and never move.

    Lettings is a business that needs to be regulated to stop people who think they know what they are doing set up shop with no formal training or qualifications.

    Algarve  Investor

    Fair points. I'm inclined to agree.

  • Natalie Barton

    I don't think Phil Spencer is advocating adding a Lettings department to a current team without further training or appointments. Sales and Lettings are both very different beasts and the staff who thrive in each area tend have very different approaches. But that's not to say an agency whose previously focused on Sales couldn't diversify by growing a team and training them - Propertymark, for example, offers courses and qualifications that would cover both staff and the business itself.


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