There will be more consolidation to come in both the online agency market and in the overall lettings sector, as landlords continue to be punished by the Government.
Alexandra Morris, managing director of online lettings specialist MakeUrMove, was speaking to EYE after Emoov’s take-over of Tepilo and lettings firm Urban.
She said the overall letting agency market is now “saturated”.
However, the actual market itself is due to shrink. She said: “We are forecasting that between 400,000 and 500,000 rental properties will be sold over the next couple of years.”
As EYE reported yesterday, she also said that her firm’s research shows that 40% of landlords – 50% in London – will hike rents this year.
She said the particular challenge for online letting businesses in today’s environment will be to achieve scale.
She said: “It is going to be all about consolidation.”
She said that to be successful, online lettings businesses will have to achieve growth and recognition, and have financial backing.
Those agents who do not achieve scale will have to consider consolidation and other business opportunities – for example, white-labelled services could be supplied to high street agents worried about their future profitability.
She said MakeUrMove, founded in 2008, had no external backing until 2016: “Our growth was organic but very slow.” She does not think this would be viable for an online firm starting up today.
MakeUrMove was one of the first online agents, founded by a landlord for landlords, with the rationale of removing some of the costs associated with traditional high street firms.
There was – and is – national coverage, but one central office, relatively few staff and a relentless focus on technology.
Its launch also led to Rightmove introducing a geographical pricing model – something that Morris wrestles with today, as she says it is hard to know what Rightmove will be charging in future.
With just over ten years in the sector, the firm is still small, with nine full-time and two part-time staff working in central Manchester.
The platform allows landlords – MakeUrMove has a portfolio of 25,000, some of whom have been using the service since the start – to manage every aspect of their portfolios online, including from smartphones.
Properties are listed within 24 hours on Rightmove and Zoopla; the system handles and screens all tenant enquiries, and manages the viewings. Tenants can also make offers through the system and landlords can choose whether to accept and conduct reference checks.
There are also a number of bolt-on services, including property management. While listing anywhere between 100 and 200 properties a month, MakeUrMove is able to offer on-the-ground services such as viewings and inventories through partner firms such as Viewber and No Letting Go.
The firm also successfully piloted, as part of its rent collection service, Credit Ladder, a way for tenants to build up credit ratings by paying rent on time.
Two years ago the business was sold to a family investment fund in London, which has since spun Credit Ladder out as an entirely separate company.
MakeUrMove at one point offered to take over Estates Direct, the online estate agency chaired by Poundland co-founder Steve Smith.
However, the owners of Estates Direct shut down their business instead, only transferring some of their lettings and management book over to MakeUrMove.
Morris, who has been with the firm from the start – she joined to answer the phones – is very clear that the business’s focus is on lettings, and not sales.
She says that the two activities are very different, requiring different technological solutions, and that she believes lettings is more suited than sales to an online environment.
She does see the increasingly harsh legislative and taxing regime as a huge challenge: “We will develop our service to landlords to help them keep on top of everything,” she said.
She believes the Government does not really understand the sector nor the mix of people within it: “Many landlords are just ordinary people with one rental property, possibly one acquired through inheritance. They don’t deserve to be squeezed.
“Some 60% of UK landlords are casual or accidental landlords, and make up the backbone of the private rented sector.
“The value of these landlords cannot be over-estimated. They are central to the UK’s rental sector. The Government needs to recognise this.”