LONDON — A fifth of UK estate agents are at risk of going bust as they struggle against the shift to online firms, according to a report from accountants Moore Stephens.
Around 5,000 estate agents are showing signs of “financial distress,” the Guardian reported.
Smaller high-street firms are struggling to keep up with both online estate agents and bigger competitors that can offer lower costs to consumers, according to the report.
Mike Finch of Moore Stephens told the Guardian: “Traditional high street estate agents’ profit margins are being squeezed from both sides, from cut-price online competitors, to their larger counterparts on the high street who are forcing them to up their spending or give up the race.”
The property business as a whole is starting to suffer as political uncertainty dampens growth.
Profits at Countrywide and Foxtons, two of the UK’s biggest estate agents, fell sharply last quarter on a downturn in property transactions.
Countrywide, the UK’s largest estate agents, posted a 98% collapse in pre-tax profits. Pre-tax profits for the half-year to June were £447,000, and operating profit — which excludes costs — dropped 77% to £6.5 million.
The group said the UK market for transactions was down 7% in the half-year, partly because people rushed to buy and sell homes before a stamp duty hike in April 2016.
Foxtons posted a 64% drop in first-half profits as it issued a stark warning about the capital’s housing market. Its group revenues were also down by 15% from £68.8 million in the first half of 2016 to £58.5 million.
The group said its position mirrored London’s stagnant housing market, which saw a 29% drop in transactions in the period.
Foxtons chief executive Nic Budden said: “Our performance has been resilient in the context of a London property market that has been further impacted by unprecedented economic and political uncertainty.”