The number of UK estate agency businesses going insolvent increased by 32% in the year to 31 July, from 216 in 2022/23 to 286 in 2023/24, according to tax and advisory firm Forvis Mazars.
The rise in insolvencies in the sector comes after the sharp hike in interest rates since the start of 2022 hit property sales.
Data from HMRC shows that the number of UK residential property transactions decreased by 12% in the year to 30 June, from 973,790 in 2022/23 to 861,210 in 2023/24. This is its lowest level in more than 10 years.
Another key problem for estate agencies is slow growth in their lettings businesses as higher interest rates have persuaded some more highly levered buy-to-let investors to exit the market.
Rebecca Dacre, partner at Forvis Mazars, said: “The high level of estate agents going insolvent shows just how tough the last few years have been for the sector. Higher interest rates have proved to be a significant deterrent to virtually anyone moving up the housing ladder.
“Estate agents are currently in the unenviable position of dealing in a hugely competitive market during a time when sales are at their lowest level in over 10 years. Without transactions, estate agents have to rely on a lettings business that is normally lower-margin than their sales business.”
She added: “Smaller-scale local firms can find themselves at substantial disadvantage against their larger regional rivals and an increasing number of PE-backed consolidators who can invest more marketing spend to attract those instructions that are still coming through. We are starting to see a reduction in interest rates and mortgage rates peaked some time ago. However, we are likely to see more insolvencies in the sector as further rate cuts are expected to be slow in coming through.”
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