Around 153 estate agents have gone insolvent in the last year, up from 148 the year before, according to a new report.
Accountancy firm Moore Stephens found that as the online estate agency market continues to grow, firms such as Hatched, Rightmove, Yopa and Zoopla have squeezed high street rivals. The higher staff and property costs of traditional estate agents often mean a struggle to compete with low commission rates of online services.
According to data company TwentyCi, market shares for online estate agents rose to 6.06% at the end of Q4 2017, an increase of almost 61%. Moore Stephens said large estate agents are “feeling the strain”, with London-based Foxtons reporting a 15% drop to £24.5m in revenue in Q1 2018 from the same period last year. Shares in the UK’s largest estate agent, Countrywide, also fell 25% in one day during June, after it issued its second profit warning of the year.
Government plans to ban letting fees charged to tenants could further narrow the profit margins of some businesses, as fees from tenants currently contribute significantly to the bottom line. Chancellor Philip Hammond announced the ban in the Autumn Statement 2016, but the government now expects the bill to be passed in the spring 2019.
Chris Marsden, restructuring partner at Moore Stephens, said: “Insolvencies of high street estate agents are increasing as online competitors continue to chip away at their sales and undermine commission rates. With the ban on letting fees starting to come into force in 2019, estate agents will struggle to pass those fees onto landlords.”
He added: “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.”