Agencies bite the dust as property sector insolvencies rise

There’s been a four per cent rise in the number of estate agencies becoming insolvent according to a new report.

In the year to September 30 some 163 agencies became insolvent - this is up from 157 in the 12 months before. 

The figures do not include, for example, Emoov and Tepilo which collapsed last week after failing to find a buyer. 

The latest data on insolvencies comes from accountancy firm Moore Stephens.

It says a number of sectors depend on the health of the residential property market and all have started to see higher levels of corporate insolvencies as house price growth slows.

Indeed, estate agency is actually the least damaged of the four sectors in the residential landscape according to Moore Stephens.

Analysing Insolvency Service data it says that the number of businesses becoming insolvent in the architectural and engineering sector has jumped 11 per cent to 178 in the year to September 30. 

Meanwhile construction insolvencies rose by nine per cent. 

Worst hit of all was the household equipment retailing sector - down a massive 33 per cent.

Rising interest rates, as well as the economic uncertainty caused by Brexit, have slowed the growth of residential property prices across the UK and caused prices in London to fall, says Moore Stephens.

“It seems the impact of the downturn in the UK property market is already being felt by a number of related sectors. We’ve had such a long run of house price increases that few commentators are sure how a correction in prices will play out” according to company partner Lee Causer.

“In the UK a large amount of people’s wealth is tied up in house prices. When there is a rise in the value of property, it causes a ‘wealth effect’, and when prices fall, it causes the opposite effect which drags down consumer confidence” he says.

“Because turnover in the UK housing market is so active, and the construction sector comprises such a large percentage of the economy, when the market takes a significant downturn it naturally spills over into the wider economy. We last saw that during the collapse in residential property prices in 2008 which put the whole economy in a tailspin” Causer continues.

“The jump in insolvencies could suggest the economy is beginning to sputter. A domino effect of insolvencies created by a disorderly Brexit appears likely to be very painful for the rest of the UK economy.”