Over 7,000 agents showing signs of ‘financial distress’ as numbers of insolvencies creep up

A total of 153 estate agents have gone insolvent in the last year, up slightly from 148 the year before.

The claim comes from accountancy firm Moore Stephens, and is based on records at Companies House to the end of the financial year in April.

Moore Stephens also says that Companies House records show that more than 7,000 UK estate agents currently show signs of financial distress.

The firm cites the growth of online agents as increasing pressure on the profit margins of high street firms.

It points to a 15% drop in revenue at Foxtons in the first half of this year, and Countrywide’s plummeting share price.

It says traditional estate agents often have higher staff and property costs than online-only firms, and can struggle to compete with the low commission rates of online services.

Moore Stephens also warned that next year’s ban on letting fees charged to tenants is likely to narrow the profit margins of agents even more, with tenants currently contributing significantly to the bottom line.

Sales volumes are in decline, says the firm, with the number of property sales in London alone falling 20% from 2014 to 2017, and the number of property sales UK-wide falling 1% in the last year, according to Land Registry figures.

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 slated to come into force in 2019, agents will struggle to pass those fees on to landlords.

“Some areas in the UK 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.”

Moore Stephens claimed  a year ago that nearly a fifth of estate agents showed signs of going bust, out of a total of 25,560.

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6 Comments

  1. ArthurHouse02

    For balance, do we know how many agencies have opened in the last year, or how many new agency branches have been opened over the period.

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  2. PaulC

    I would suggest many more than have thus far closed their doors.

    The rise of the bedroom agent exists.

    This combined with fee pressure and slowing volumes is really creating some tougher times already for many agents.

    With Alot of letting agents attempting to grow their sales presence also taking a bigger slice of the market share.

    I fear the letting fee ban will be the final nail in the coffin for many.

     

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  3. coleface

    All the reasons agents might be experiencing tougher times are undoubtedly correct – however as usual the headline is blatant scaremongering.

    From 150 to 7000!!! And how do they measure a sign of stress at Companies House? And how does that compare to any other industry.

    We may be in for a period of survival of the fittest, but i don’t believe there is anything close to 7000 unfit agencies. Thats an extraordinary number to pluck out.

     

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  4. PeeBee

    It would be interesting to see what percentage of the alleged 7000 are non-high street based.

    Are they classing each and every self-employed / franchised / whatever-the-phrase local bod as an individual agent?  If so – what percentage of those are “showing signs of financial distress”?

    Why is Moore Stephens’ EYE so sharply focused on the EA world?

    How do accountancy firms stack up financially these days?

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  5. smile please

    Culling of the heard is not a bad thing.

    However i doubt 7000 are in dire straits, headline grabbing by the accountants or propaganda paid for by somebody.

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  6. Property Pundit

    About as accurate as all that #projectfear nonsense. How do they check those firms operating as sole traders, partnerships @ LLPs?

     

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