25% of UK estate agents ‘in financial distress’, warns insolvency firm

Almost one in five property companies are in financial distress, insolvency firm Begbies Traynor has said.

It says that over 25,000 companies, including residential sales and letting agents as well as landlord firms and other property businesses, are facing financial problems, with the figure up 6.6% on a year ago.

The firm said that residential estate agents have been worst hit, with an 11% rise in the number of firms potentially in trouble.

The Begbies Traynor data suggests that 25% of estate agents across the UK have financial problems – an 11% rise on this time a year ago.

Begbies Traynor says that of firms currently in financial distress, one third are unlikely to be trading in three years’ time.

In the last 12 months, the market has been hit by low supply, particularly in London where George Osborne’s hiking of Stamp Duty in 2014 for the most expensive homes continues to bite. Yesterday, central London agent Peter Wetherell tweeted: “Turnover decline due to Osborne. Worse than the 2008 banking crisis.”

The market this year has also had to contend with a distortion caused by the introduction of a 3% Stamp Duty surcharge on the purchase of second homes.

However, the Begbies Traynor data cautiously suggests that the worst could be over and that the Brexit vote is not– yet – a factor.

The firm says that levels of financial distress across the property industry peaked in June.

Nevertheless, according to the RICS, the number of homes for sale is now at a record low, creating pressure on estate agents’ fees.

Foxtons shares are down by 44% this year and Countrywide by 56%.

Julie Palmer, a partner at Begbies Traynor, told the Telegraph: “Without doubt, 2016 has been a difficult year for the UK real estate industry.

“Not only did it have to contend with a major slowdown in activity in the run-up to the EU referendum, but over the past 12 months it has also borne the brunt of crippling public policy changes, which have rocked the sector to its foundations.”

She added: “However, while levels of financial distress across the sector are much higher than at this stage last year, positive trading in the months following the EU referendum suggests that any potential negative Brexit impact on the housing industry may still be some way off.”

Begbies Traynor has acted in a number of cases where estate agency businesses have failed. This year it handled the collapse of Penyards in Hampshire

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Written by: Houseladder