An insolvency firm active in the property sector says that after a year of major taxation, legislative and economic volatility, many estate agencies are nearing breaking point.
Begbies Traynor - which operates a ‘red flag alert’ system monitoring high street estate agents, management companies, letting agencies and landlords - claims some 25,669 UK property firms are suffering some form of financial distress. This is a seven per cent rise on the number recorded a year ago.
The affected companies all have at least one ‘red flag’ against their financial status, and Begbies Traynor suggests around one third of these are unlikely to be trading in three years’ time.
The most sizeable increase in financial distress was felt by high street estate agents, which experienced an 11 per cent rise in financial distress over the past 12 months. According to the research, 3,182 estate agents finished November in a poor financial state: a year ago the figure was 2,877. This year’s deterioration was caused by buyer uncertainty ahead of the Brexit vote and growing competition from online challengers.
It says estate agents in London have seen the sharpest increase in distress over the period, rising 22 per cent year-on-year, with 1,066 firms ending November in a weakened financial state. A year earlier the figure was 875.
Begbies Traynor says levels of financial distress across the industry peaked in June ahead of the Referendum vote, when uncertainty was at its highest.
“From April’s shakeup of stamp duty and the recent clampdown on letting agent fees revealed in the Autumn Statement, which wiped £70m off the combined value of Foxtons and Countrywide when it was announced, to the phasing out of buy to let tax relief from April next year, the sector can’t seem to catch a break” says
Julie Palmer, a partner at Begbies Traynor.
“Despite continued house price resilience, estate agents, especially those in London, have had a particularly challenging time, impacted by low transactional volumes, weak buyer and seller confidence, as well as fierce competition from online rivals such as Purplebricks, eMoov and Tepilo” she says.