More than 7,000 UK property agents risk going bust, says study

More than 150 estate agency firms went insolvent last year and as many as 7,000 are at risk as high street operators face the triple whammy of online competition, a sagging property market and cuts to letting fees.

A study by accountants Moore Stephens found that 153 estate agency firms went insolvent in the year to May 2018, a small increase on the 148 the year before.

But it found that more than 7,000 estate agents “currently show signs of financial distress”.

Last week, shares in Britain’s biggest estate agent, Countrywide Properties, plunged 25 per cent after it issued its fourth profit warning in eight months and called on shareholders to raise fresh funds to cut its debt.

Countrywide, the company behind Hamptons, Bairstow Eves, Taylors and Gascoigne-Pees, has been hit hard by a downturn in the housing market in London and the southeast, a botched revamp of the business and growing competition from new online firms such as Purplebricks.

Estate agents focused on the Brexit-hit London property market have been among the worst affected. Earlier this year Foxtons reported a 65 per cent fall in profit.

Moore Stephens said government plans to ban letting fees charged to tenants may narrow the profit margins of some estate agents even more, as fees from tenants currently contribute significantly to the bottom line.

Estate agents rely on transaction activity rather than rising house prices to earn commission, and have been hit hard by the 20 per cent fall in the number of property sales in the London area since 2014.

The extra stamp duty surcharge of 3 per cent of the value of a buy-to-let home introduced in April 2016 has also added to the woes of estate agents, with some buy-to-let investors choosing not to add to their portfolios.

Chris Marsden, restructuring partner at Moore Stephens, said: “Insolvencies of high street estate agent are increasing as online competitors continue to chip away at their sales.

“With the ban on letting fees stated to come into force in 2019, estate agents will struggle to pass those fees on to 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.”