28th August 2013
The housing market’s renewed vigour looks to have come too late for many UK estate agents as the amount of firms going bust has soared in the past year, writes Philip Scott.
The amount of estate agent entering insolvency shot up by 57 per cent in the 12 months to the end of June, rising to 77 from 49 the previous year, according to accountancy firm Wilkins Kennedy LLP.
The figures follow the news that the UK property market is enjoying a renaissance. A report from the Royal Institute of Chartered Surveyors (Rics) this month claimed that UK house prices grew at their fastest pace since 2006 in July, having delivered a fourth successive month of gains with the rise being enjoyed in all parts of the country, not just in the south east.
Wilkins Kennedy says the surge in the number of estate agents becoming insolvent is largely due to prolonged stagnation in the property market. Fewer successful sales resulted in intense competition between estate agents and whilst the level of property transactions is now starting to recover nationwide, this has come too late for many. The analysis reveals, however, that only a small percentage of insolvent estate agents were based in London.
Anthony Cork, partner at Wilkins Kennedy, comments: “London has always been a more resilient market for estate agents, due to the higher property prices, constant demand and healthier lettings markets. Although competition for business is fierce, transactions are constantly being made, which is not the picture elsewhere in the country.”
The need for high street estate agents’ local expertise has also plummeted in recent years as online property portals such as Rightmove and Zoopla, have allowed more and more buyers to gain all the information they need independently, making it more difficult for agencies to compete.
Quick sale companies
Wilkins Kennedy also found that the increase in unemployment and squeeze on household budgets have meant that some sellers are under pressure to sell quickly, with many turning to ‘quick sale companies’, which usually reduce a property’s market value by 10-25 per cent with some even slashing the market value price by up to 53 per cent. These companies prioritise a rapid sale over achieving the highest possible sales price. This is vastly different from the conventional business model of estate agents, who typically aim to gain the best offer price, helping to ensure a healthy profit margin for themselves.
“The new breed of quick sale companies targets those sellers who are most desperate to sell. As well as snatching instructions from estate agents, they may also be disrupting local property markets as buyers get a distorted idea of what the going rate of property is,” adds Cork.
Recently firms such as fastsaletoday.co.uk and quickpropertysale.co.uk have come under attack from the Office of Fair Trading for failing to comply with best practice regulations. This follows a clampdown in 2008 on sale and rent companies, who were also accused of wide spread unethical practice.