Written by: Keith Tully
Published: 25th August 2017
Almost one in every five estate agents around the UK are facing seriously tough financial challenges and are at risk of becoming insolvent.
That’s according to research carried out by the law firm Moore Stephens, which is convinced that 19 per cent of all traditional estate agents around the country are currently exhibiting signs that indicate they are at risk of going insolvent.
A key part of the problem for many traditional estate agents is understood to be that they’re struggling to maintain profitability in the face of growing competition from online-only estate agents.
While traditional estate agents typically have relatively high overheads, including office rents and staff costs, their online competitors are able to keep their costs considerably lower as they focus on certain sectors of the market.
Adding to the challenges estate agents are facing is that fact that potential house buyers can now view any number of properties via websites and mobile apps, such as those of Zoopla and Rightmove, without needing to liaise directly with any local agency experts.
Furthermore, fewer houses are now being sold on an annual basis, as compared with a decade ago.
Official figures suggest that while there were roughly 1.7 million properties sold across the UK in the year 2006/7, that number was down by almost a third to 1.2 million during 2016/17.
According to Moore Stephens, a relatively high number of British homeowners are now preferring to improve and add extensions to their current homes rather than invest the time and money it takes to move into a new place.
All of which is adding up to a challenging operational environment for traditional estate agents and many are now seemingly in serious financial difficulty.
“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,” says Mike Finch from Moore Stephens.
“Many areas across the UK are oversaturated with estate agents, and competition is becoming too much for some smaller businesses.”