Franchisees, potential franchisees, and investors are naturally very influenced by how their franchise investment is performing, and how it is likely to perform in the years to come. There is always a sense of anticipation when a business is about to release its end of year figures, and as I write this column, the Belvoir Group is preparing to publish its figures for 2022, which will made available at the end of March. With a track record of 25 years of unbroken profit growth, it would be an amazing achievement to see this track record extended, particularly when you consider the turmoil that the markets have recently experienced, but what I can confirm is that the Belvoir Group has certainly exceeded the expectations set out by management at the beginning of 2022.
The Belvoir Group currently comprises of six brands, operating across the UK via property franchisees who are based in commercial premises, and mortgage advisors, who combine to support customers throughout their property journey in residential sales and lettings. Looking back at 2021, as the country emerged from several lockdowns this was clearly a bumper year for the UK housing market. Low interest rates, pent up consumer demand and a stamp duty holiday created an extremely buoyant market, which impacted positively on many businesses. Belvoir had a particularly good year, and it was one that we always knew would be a very difficult act to follow in 2022. Although we are not quite ready to release the full year’s numbers, it is still not out of the question that the Belvoir Group may yet have shown growth in 2022, but that remains to be confirmed.
I think that the past couple of years have been a real rollercoaster for most franchises in terms of the impact of lockdowns, political uncertainty, and other external market factors, including the war in Eastern Europe. Last September’s minibudget caused a great deal of disturbance, sending out shockwaves that reverberated throughout the financial world, resulting in a series of consecutive interest rate rises. This period of chaos culminated in what can best be described as consumer paralysis, where people decided to put their plans on hold to remortgage, invest in new cars, or indulge in costly house renovations. For the public a more cautious approach seemed preferable, with people understandably preferring to ride out the storm for a while as they waited to see what might happen next. This not only affected the Belvoir Group in terms of the number of mortgages that were written, but it also affected all other property and mortgage companies, which in turn caused a ripple effect across other businesses.
There is currently an interesting scenario being witnessed, with Bank of England interest rates going in one direction and mortgage rates going in another direction. This being the case we have slightly pared back our mortgage productivity forecast for 2023/2024, but the lettings and estate agency side of the business, which is the absolute core of our business offering, remains very strong. There is huge demand for rental properties, and a shortage of good quality accommodation, with rising rents, which provides our franchisees with a reliable recurring revenue stream so residential lettings are still forecast to grow in 2023.
There is evidence that consumers are becoming accustomed to the fact that interest rates are slightly higher and coming to terms with the fact that they need to get on with their lives. For example, if someone needs to move house because their family is growing, or they have got divorced or have a new job and need to relocate, they cannot wait for ever. For this reason, estate agency remains very resilient. The market saw 20% more transactions in 2021, and then the market shrank by 15% in 2022, so in effect it returned to normal.
People may also be gaining confidence from the fact that mortgage rates have once again started to fall to below 4%. The Belvoir Group has 300 mortgage advisors and a great mortgage business, so I although I am forecasting a slight dip in the number of mortgage transactions at the beginning of the year, there is likely to be a gradual recovery as the year plays out.