More than 7,000 UK estate agents are showing signs of financial distress and are on the brink of collapse, raising fears the market could become the latest Blockbuster – the video rental chain that folded in 2013.
The research by Moore Stephens, an accountancy firm, reveals another 153 estate agents have gone insolvent in the last year, up from 148 in 2017.
It blamed this on the increasing pressure from online rivals.
Traditional estate agents often have higher staff and property costs than online-only firms, meaning they can struggle to compete with the low commission rates of online services.
The report warned that government plans to ban letting fees charged to tenants may narrow the profit margins of some estate agents further, as fees from tenants currently contribute significantly to the bottom line.
The extra stamp duty surcharge of 3% of the value of a buy-to-let home could also be contributing to problems for estate agents, with some investors choosing not to add to their portfolios.
Meanwhile, the number of property sales in London alone fell 20% from 2014 to 2017, and the number of property sales UK-wide dropped 1% in the last year.
Chris Marsden, restructuring partner at Moore Stephens, said online competitors continue to chip away at sales and undermine commission rates.
In addition, some areas in the UK have an excess capacity of estate agents, which could mean there is not enough business to spread around as property transactions stagnate.
“Estate agents with a traditional model may have to look at whether they can reduce overheads and review their service offering to effectively compete in the current market,” said Marsden.
The report comes after Foxtons reported a 15% drop in revenue in the first quarter, while shares in Countrywide fell 25% in one day after it issued its second profit warning of the year.
The online estate agents market is growing, with the likes of Hatched and Yopa further increasing pressure on the profit margins of high street rivals.
Want to know the story behind Britain's latest property mogul? Why a company is going bust? Our coverage goes beyond run-of-the-mill news on key real estate issues.
Our subscribers are made up of the most influential Founders and CEO's in UK property. Gain a competitive edge and get informed - read what they read.
Understand exactly what the most senior figures in UK property are thinking. Exclusive opinion articles from powerful real estate influencers that move markets.