Almost one in five property companies are in financial distress, insolvency firm Begbies Traynor has said.
It says that over 25,000 companies, including residential sales and letting agents as well as landlord firms and other property businesses, are facing financial problems, with the figure up 6.6% on a year ago.
The firm said that residential estate agents have been worst hit, with an 11% rise in the number of firms potentially in trouble.
The Begbies Traynor data suggests that 25% of estate agents across the UK have financial problems – an 11% rise on this time a year ago.
Begbies Traynor says that of firms currently in financial distress, one third are unlikely to be trading in three years’ time.
In the last 12 months, the market has been hit by low supply, particularly in London where George Osborne’s hiking of Stamp Duty in 2014 for the most expensive homes continues to bite. Yesterday, central London agent Peter Wetherell tweeted: “Turnover decline due to Osborne. Worse than the 2008 banking crisis.”
The market this year has also had to contend with a distortion caused by the introduction of a 3% Stamp Duty surcharge on the purchase of second homes.
However, the Begbies Traynor data cautiously suggests that the worst could be over and that the Brexit vote is not– yet – a factor.
The firm says that levels of financial distress across the property industry peaked in June.
Nevertheless, according to the RICS, the number of homes for sale is now at a record low, creating pressure on estate agents’ fees.
Foxtons shares are down by 44% this year and Countrywide by 56%.
Julie Palmer, a partner at Begbies Traynor, told the Telegraph: “Without doubt, 2016 has been a difficult year for the UK real estate industry.
“Not only did it have to contend with a major slowdown in activity in the run-up to the EU referendum, but over the past 12 months it has also borne the brunt of crippling public policy changes, which have rocked the sector to its foundations.”
She added: “However, while levels of financial distress across the sector are much higher than at this stage last year, positive trading in the months following the EU referendum suggests that any potential negative Brexit impact on the housing industry may still be some way off.”
Begbies Traynor has acted in a number of cases where estate agency businesses have failed. This year it handled the collapse of Penyards in Hampshire.
Interesting stats,
Not surprised that that the Government and others attack on this industry is beginning to bite?
I wish that our member associations would get their act together and tell them that estate agency, in the majority of the UK ,is amongst the best value in the World and cannot be done properly for much less than 1%. Particularly, when the Government themselves charge far more in SDLT plus 20% of many agents fees in VAT!
No surprise that instruction levels are declining as a consequence of sellers not being able to afford to move more often which is helping to fuel the rise of the loss leading on line only agents whose ‘investors’ are subsiding every instruction that these agents take on, thereby eroding fees further…… when fees ought to be for a more personal service?
So at a time when agents, particularly those small one branch agents, most need the support of RM. What do they do?
They increase fees (one agent on PIE reported a 15% rise next year) when agents are listing less properties! Are RM also further helpimg those loss leaders to gain traction by selling data drawn in by their own real tine feed via prospecting products which may target the market much more cost effectively than expensive national TV advertising campaigns?
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The market is changing, a lot of agents are simply not changing with it..
We experienced a 100%+ growth this year and raised our fees on average.. Doubled our headcount.
Although looking at our local market there looks to be plenty of our competitors who have seen a significant reduction in available stock, this combined with lower fees must equate in some instance to 50% reduction in turnover which is extremely difficult to cope with.
I think we will start to seen some smaller agents fail fairly soon, as a challenging cash flow time is right around the corner.
Simply too much choice on the market.. lets say a vendor get out One of the On liners, The biggest corporate and the biggest independent, where does that leave the rest of the market.
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PaulC,
What do you put your major success this year down to? Where are you based? Would you have ideas to help other non-competitor independent agents? Can you be vcontacted?
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Just doing the basics right and well.. That and investing heavily in growth and people.
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That and having the following in place.
Completely Re-thinking how the staff and processes work
Compelling and engaging marketing plan and materials
Hitting the sweet spot price wise and then also volume wise
Ensuring the team are as passionate about the business as I am
Working 80+ hours a week
Sacrificing everything to ensure we succeed.
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We too have just celebrated our best ever year on lettings and growth in sales. Overall we have grown over 15% this year.
We are in an extremely competetive area and it is unfortunate but fortunate for us that other agents do not seem to move with the times. We’ve actually had 3 agents open offices in our area this year but have been relatively insignificant in terms of taking stock.
The market is changing that is for sure and only the ones that are willing to change and adapt are going to survive the next few years.
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Hurrah for those bucking the trend and telling us all about it! The usual cliches come out around doing the job right, providing excellent customer service, paying for the best people, like we didnt know!
With this headline I would rather be hearing from those 25% (yes thats 1 in 4) who are currently in the mire. Behind this headline; multiple business failures, job losses, debt and empty shop units. But dont worry folks because theres always those that are doing just fine!
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It would be a good time for RM to introduce a reduced fee for long standing members with lower end numbers of listings (say less than 50 a year).. to help through this period. If they don’t and many smaller agents leave or join together they will lose far more revenue in the long run!
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Over the past few weeks I have been thinking about Estate Agents need for Rightmove and Zoopla. We are a one office business and have our own website where traffic is driven and it is surprising how many enquiries we get that bypass the major portals that we subscribe to. I mentioned in the office the scenario whereby all agents leave the portals and one of my sales negotiators said that she enjoyed looking at the portals and my reply was yes at my expense! If all agents agreed not to subscribe we would all save a significant amount of money and guess what those agents that promoted themselves with good websites would perhaps win over their competitors. Quite why we rely so heavily on the portals to promote our businesses I do not know, lets kick the portals into touch and take control over our own industry and destiny.
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or join OTM and have a stake in your future and help take RM and Zoopla down……
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OTM has not worked and will not work with the attitude they have and coupled with poor customer service. The only way forward is to get rid of all these portals and get consumers to use Google as we do for most other purchases and help we want in getting information. It should also help to get rid of online companies.
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“OTM has not worked and will not work with the attitude they have and coupled with poor customer service.”
Speaking from first-hand experience – or regurgitated propaganda?
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By ongoing and expensive experience. For your interest I am a gold member.
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“For your interest I am a gold member.”
Actually it has interested me. I initially found one ‘Philip Pocock’ – who works for a non-OTM Agent.
Maybe what threw me was your above statement that you are a one-branch business yet, assuming you are who I now take you to be, you have three branches listed
I’d like to take this conversation further. Can you please catch me on Twitter?
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100% growth. Um….were you close last year?
A few reasons many agents are struggling. Both self inflicted.
Firstly, most would agree we are pretty much held to ransom by RM. But there was an alternative….OTM. For years we moaned about RM and have longed for an alternative. We got one, and then vast majority of agents bottled it and didn’t support OTM and chose to stick with RM. Go figure.
Secondly fees. I work in a large coastal town with about 20 agents within a couple mile radius. At the moment anything above 1% is a decent fee. Two years ago the average fee was 1.6%, last year 1.25%. This year 0.85%. Desperate agents who don’t value or can’t sell the value of their service dropping their pants and walking in quoting rock bottom fees from the off. Others have to follow….well actually they don’t…but they do. I’ve spoken to many of the agents in town trying to persuade them to start charging a sensible fee for their service but they just don’t get it. I’ll predict 25% of them will be gone by the end of next year, still scratching their heads as the windows are whitewashed.
We moan a lot in our industry but many of the things we moan about are of our own making. We could so easily do something about it. But we don’t.
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Rightmove is the reason agents are struggling… right..
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FromTheHip64,
Do you want to help do something about it? Can we contact you?
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Hi Agent V,
Would rather not share contact details on here, are you on Twitter or a way to contact.
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“I’ve spoken to many of the agents in town trying to persuade them to start charging a sensible fee for their service but they just don’t get it.”
The CMA will be after you !!!
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Rightmove is Awesome, brilliant cost per lead, brilliant tool for the customer.. They are not the issue..
On the Market, Great idea and we need a strong competitor to RM, simply going about achieving it the wrong way. Drop the one other portal rule, charge £50 per agent per month, have every agent on it and therefor every home on it.
Then build out from there simple. really.. but alas wrong approach at the top.
Not closed last year, but it was our first year of operation.. We launched January 2nd 2015.
Listings in 2015 = 472
Listings in 2016 = 831
Sales Agreed in 2015 = 240
Sales Agreed in 2016 = 555
Available Stock in Dec 15 = 154 (Not including SSTC)
Available Stock in Dec 16 = 242 (Not including SSTC)
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How many branches is that across Paul?
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One
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You really need to consider joining a part time mentoring scheme, where you can help non-competing agents with your experience… and increase your earnings somewhat at the same time. Would you be interested in helping others?
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The biggest challenge for me is time, I would love to help get OTM on track but based on what I have heard I doubt anyone would listen.
My background includes being part of a management team that built a viable competitor to Autotrader in the Automotive space.
We went from Zero market share to number 2 in the used automotive space in 4 years.
The key is stock and having all the stock, that is where the value lies, so the only think that matter right now to OTM is having total market coverage..
Especially now the tech is built, they should be switching to a low cost model, or even hybrid model.. Lose the one other portal rule.
Then start building value for the members and end users.
OTM could easily be number 2 and would keep the other 2 in check.
Joining a mentoring scheme right now would not be the best use of my time, I have some real challenges ahead this year. We are going to setup our own mortgage division, separate the lettings side of the business and hopefully open 2 new branches in 2017. That combined with trying to create a franchise model and raise some cash along the way.
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Can you be contacted on twitter about this post?
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Well done Paul, and good luck. I hope it is a strong third year for you.
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Spoke with one of my clients on Friday, and he too has had his best ever year (and he’s not a billshutter). He has been going for over 20 years and is in stockbroker belt land in Surrey.
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I worked in Surrey last year, and the only reason the company made a profit was because of lettings…I think the sales side made pretty much zero money
Hate to think what the sales made this year considering the drop off in sales since 2015. They were so reliant on letting fees especially tenants fees, the ban may send them over the edge
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In our area you can move with the times and even be ahead of the game, but the simple fact is people ain’t moving.
All of our villages are now at around 50% of the usual available stock counts….. costa coffee and the wine bars are as busy as usual though and you can’t get a builder for love nor money.
Gunna be an interesting 2017 for many I suspect.
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Hi Ric,
Do you think many people think about moving, but put off putting their house up for sale because they can’t see anywhere available they would want to move to?
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“Begbies Traynor has said… that over 25,000 companies, including residential sales and letting agents as well as landlord firms and other property businesses, are facing financial problems, with the figure up 6.6% on a year ago.”
Hmmm – two potential responses:
Oh… my gosh. I can’t believe it.
or
Complete, unadulterated MDT. I don’t believe it.
Tell you what – I’ll go for the latter.
Forgive my utter disbelief for this article – but this is from a similar woe-fest report published on EYE in January:
“More than 50,000 construction and “real estate” firms in the UK are in significant financial distress, says an insolvency firm.”
SO… half the figure from the previous year equated to an increase, apparently.
Good old accountants… ask for an accurate total and they’ll give you both of them.
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A real mix out there and looks like a South East vs rest of the country.
Up north seems to be lots of stock and a fair bit not shifting.
Down South looks like limited stock and agents over pricing to win instructions.
In my neck of the woods we have a lot of very good agents ( as in marketing ) so very difficult to differenchiate yourself.
Where I am agents are theit own worse enimies. Over pricing, over promising and silly low fees.
It’s not unheard of for properties being 100k over priced and agents selling for 0.75% all in!
These offices with staff, overheads, marketing etc will be circa 10 – 15k a month to keep the doors open
2017 will be very interesting.
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Over pricing is certainly creeping in, which has dangerous consequences.. It risks accelerating a slow down in the market and creates unrealistic expectations from other vendors. With little actual sales data to back up transactions the mortgage down values could start to come flooding in.
These combined could grind things to a halt and once we get to that point the pain it could inflict on agents could be quite profound.
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Where agents overprice, us older more experienced agents profit greatly.
If you are a young, highly motivated lister working for one the bigger outfits, I salute you, whilst I sweep up behind !
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