Nearly 5000 estate agents are showing signs of financial distress, according to research by accountants Moore Stephens.
The research showed that high street estate agents are being squeezed out by online agents such as PurpleBricks and House Simple. Traditional estate agents are likely to have higher property and staff costs so therefore struggle to compete with the low-cost fixed-fee model offered by online-only agents in certain residential property categories.
Mike Finch, restructuring and insolvency partner at Moore Stephens said: “Traditional high street estate agents’ profit margins are being squeezed from both sides, from cut price online competitors, to their larger counterparts on the high street who are forcing them to up their spending or give up the race.
“Many areas across the UK are oversaturated with estate agents, and competition is becoming too much for some smaller businesses.”
Last week Countrywide and Foxtons released their half year results which showed drastic drops in pre-tax profits, the formers down from £24.3m in the same period in 2016 to just £447,000 in June this year.
Property sales in the UK are still struggling to climb back to their peak before the financial crisis, when over 1.7m sales were made in 2006/7. The number of property sales has since fallen 32 per cent to 1.2m sales in 2016/17 according to the HMRC UK Property Transactions Count this year.