Estate Agents In Trouble

Increasing levels of competition, a soft property market and lower letting fees are putting 7,000 estate agents at risk, with over 150 firms becoming insolvent in 2017.

153 firms went insolvent in 2017, an increase on the figure of 148 registered in 2016 according to Moore Stephens, an accountancy firm.

Moore Stevens say that 7,000 estate agents "currently show signs of financial distress".

The fourth profit warning in eight months for Countrywide, the largest estate agent in the UK, combined with concerns about the firm's debt caused shares in the firm to fall by 25% last week.

Increasing competition from online agents such as Purplebricks and a downturn in London and the south-east have put pressure on Countrywide, which is also the parent of Hamptons, Bairstow Eves, Taylors and Gascoigne-Pees.

A London or south-east focus has affected other firms also, with Foxtons being one such example, having seen their profits drop by 65%.

The proposed ban on letting fees could also affect many agents as some firms are heavily exposed due to their current business models. The 20% fall in the number of property sales in the London area since 2014 and the 3% stamp duty surcharge on buy-to-lets have also contributed to the squeeze.

According to Chris Marsden of Moore Stephens:

"Insolvencies of high street estate agents 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."

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