More than 7,000 UK estate agents are currently showing signs of financial distress, according a report by accountancy firm Moore Stephens.
In the last year, 153 estate agents have gone insolvent, up from 148 the year before. Large estate agents such as Foxtons have reported a 15% drop in revenue to £24.5m for the fisrt quarter of 2018 compared to the same period last year.
Shares in the UK’s largest estate agent Countrywide fell by 25% in one day in late June following the second profit warning of the year.
Competition from Online Agents
The online estate agents market is growing, with companies such as Hatched and Yopa increasing the pressure on the profit margins of high street rivals.
Traditional estate agents, with their high staff and property costs, are struggling to compete with online firms who have much lower overhead costs and are can offer much lower rates.
Insolvencies are increasing
Chris Marsden, Restructuring partner, says: “Insolvencies of high street estate agent are increasing as online competitors continue to chip away at their sales and undermine commission rates.
“With the ban on letting fees stated to come into force in 2019, estate agents will struggle to pass those fees onto landlords.
“Some areas in the UK are appear to have an excess capacity of estate agents, which could mean there is not enough business to spread around as property transactions stagnate.
“Estate agents with a traditional model may have to look at whether they can reduce overheads and review their service offering to effectively compete in the current market.”
Property sales appear to be in decline, with the number of property sales in London alone falling 20% from 2014 to 2017, according to HM Land Registry and HMRC UK Property Transactions Count.