Insolvency firm, Moore Stephens, released research that 153 estate agencies have gone bust in the last year, with over 7000 displaying financial difficulties. The UK estate agency sector is in a fragile condition, with the reasons being three fold - online competition, letting fee cuts and a failing property market.
Estate Agents, Foxtons and Countrywide provide evidence for this as Countrywide’s share price tumbles down again, to less than 38p (as of 29th June 2018) and Foxtons reported a 15 per cent fall in revenue (for the first quarter of 2018).
There has been a rise of online agencies such as www.yopa.co.uk, and www.purplebricks.co.uk , adding to the already well known online agencies, www.rightmove.co.uk and www.zoopla.co.uk. Online agencies do not have as many fixed costs, which is not in the traditional agencies favour as they chip away at their sales. This increases the amount of high street estate agent insolvencies.
The upcoming ban on lettings fees agents levy on tenants will make incomes more marginal. This government proposal will begin in 2019 and Chris Marsden of Moore Stephens says ‘’estate agents will struggle to pass those fees on to landlords’’, bringing more issues for those in this sector.
There is oversaturation of estate agents in some areas of the UK, meaning there is not enough business to share around. Falling number of properties on the market has exacerbated problems. Sales volume in London alone, has fallen 20 per cent from 2014 to 2017, with the UK-wide figure falling one percent just in the last year. As estate agents rely more on high volume of transactions as opposed to high prices then their commissions have been severely curtailed.
Therefore, traditional estate agencies may have to investigate if a reduction of overheads or a review of their service offering can help them to effectively compete and succeed in the currently struggling market.