The UK’s largest estate agent will lose market share to hybrid competitors, a City analyst has said.

However, the risk is not confined just to Countrywide but is industry-wide.

Scott Fulton, of brokers Whitman Howard, said in a preview of next week’s trading update from Countrywide: “Competition in UK estate agency is both changing and increasing. The risk that hybrid models will gain market share is meaningful.

“Moreover the low-cost nature of these models also poses a risk to industry-wide pricing levels for estate agency.”

Fulton expects next week’s Countrywide trading update to reveal a relatively positive start to the year.

He said: “Housing transactions and prices have benefited from demand brought forward by the second home surcharge.

“However, it will be the outcome for the remainder of the year which will determine the share price. We remain convinced that Countrywide will cede an increasing share of a flat transaction market to hybrid competitors.”

Fulton looks at Countrywide’s performance for the first half of last year, when there was a 20% fall in EBITDA (earnings after costs) in its new Retail division – which consists of all sales and lettings outside London.

Fulton said that next week’s trading update is likely to point to an improvement in Q1 transaction this year “as a function of demand ahead of the second home surcharge”.

He went on: “However, the extent of the any growth should be carefully monitored. If it is less than that of the total market this may indicate that the company is losing market share.

“This loss will be exacerbated through the remainder of the year if, as commentators are indicating, transaction growth stalls ahead of the EU Referendum.”

Fulton’s report also warns that the widely expected reduction in buy-to-let volumes may impact on Countrywide, and also that some of Countrywide’s other areas of activity – financial services and business-to-business – could “also be disrupted by online providers”.

Fulton said: “Specifically, we now expect a declining market share in housing transaction together with higher levels of competition in mortgage advisory and conveyancing.”

He said that Countrywide does have sufficient scope for some “significant purchases”.

He went on: “The issue will be to what extent it will seek to replicate its existing operations (traditional estate agency and lettings) or whether it will embrace the emerging market dynamic and seek alternatives. Logically, we believe that Countrywide should seek the latter.”

However, Fulton says that were Countrywide to compete directly with hybrid agents, it could cause confusion in the market given the different price points and structures and that it may prefer to expand its mortgage and surveying businesses.