Estate agents struggle as markets change and technology advances

 

A combination of lower transaction levels and the rise of online agencies is at risk of putting thousands of estate agents out of action. Is it time to change the business model?

One of London’s biggest estate agents Foxtons announced a 65% drop in profits earlier this year, and it turns out the agency is just one of many who are struggling to keep up in today’s housing market, with a further 7,000 agents showing “signs of financial distress”.

This accounts for more than a quarter (27%) of estate agents across the country, according to research by accountants Moore Stephens, which also found that 153 agencies have become insolvent over the past year up to May. A further 148 companies folded during the previous 12-month period.

London has been one of the worst hit areas as transaction levels have dipped recently, due to a number of factors including Brexit and political uncertainty, as well as house price contractions in the capital.

Online agents take over

Shares in Countrywide, which is the UK’s largest estate agent running Bairstow Eves, Hamptons and Taylors, have dropped by 25% as it fell further into debt with four profit warnings in eight months, having been particularly badly hit by London’s downturn.

Online agents such as Purplebricks, meanwhile, are going from strength to strength as more buyers and sellers turn to them as opposed to the traditional, high street estate agents due to their cheaper, digital business models. While Countrywide’s share prices fell by more than 60%, Purplebricks shares have shrunk by 8.2%, as it has been less affected by the decline in house sales.

Chris Marsden, restructuring partner at Moore Stephens, said: “Insolvencies of high street estate agents are increasing as online competitors continue to chip away at their sales and undermine commission rates.

“Some areas in the UK appear to have an excess capacity of estate agents, which could mean there is not enough business to spread around as property transactions stagnate.”

High street agents must be competitive

With letting agent fees set to be banned by the government’s Tenant Fees Bill, which is expected to come into law next year, estate agents could soon struggle even more to cover their costs. Landlords are likely to bear the brunt of this change as many predict agents will pass on the costs to them, with more landlords than ever now looking at cutting out the middle man and letting directly to tenants to avoid losing a percentage of their profits.

Estate agents who can remain competitive without passing on these extra costs could fare better than those who don’t, and it seems that the industry as a whole must adapt to the expanding proptech culture in order to survive.

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000

South Central – Birmingham City Centre Apartments

Highly anticipated 28 storey launch in Birmingham City Centre with an impressive roof garden and communal facilities.

  • 154 units across 28 storeys
  • Residential multi-media community room, gym, roof garden and sky cinema
  • Excellent future connectivity via the metro system to other key transport hubs and locations around the city

from £205,800

ba-

Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator

.

Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.

Login

Not a member? Sign up for free

Buy-to-let-property

Estate agents struggle as markets change and technology advances

Example

By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.