Top-tier accountancy firm Forvis Mazars says low sales and lettings volumes are to blame for the number of UK estate agencies becoming insolvent, a figre that has increased by 32% over the past 12 months.

This rise in has come after the sharp hike in interest rates at the start of 2022 hit home sales, it is claime, both pushing up mortgage costs, making lenders more cautious and reducing the availability of higher LTV mortgages.

According to data from HMRC, this led to a 12% drop in property transactions, which fell from 973,790 in 2022/23 to 861,210 in 2023/24 – its lowest level in 10 years. The number of agencies going bust increased from 216 in 2022/23 to 286 in 2023/24.

The high level of estate agents going insolvent shows just how tough the last few years have been.”

Another key issue for estate agencies, Forvis Mazars says, was slow growth in their lettings businesses as higher interest rates persuaded some of the more highly geared buy-to-let investors to exit the market.

Rebecca Dacre, partner at Forvis Mazars, commented: “The high level of estate agents going insolvent shows just how tough the last few years have been for the sector.

“Higher interest rates have proved to be a significant deterrent to virtually anyone moving up the housing ladder.”

She adds: “Without transactions estate agents have to rely on a lettings business that is normally lower margin than their sales business.”

Substantial disadvantage

“Smaller-scale local firms can find themselves at substantial disadvantage against their larger regional rivals and an increasing number of PE backed consolidators who can invest more marketing spend to attract those instructions that are still coming through.”

“We are starting to see a reduction in interest rates and mortgage rates peaked some time ago. However, we are likely to more insolvencies in the sector as further rate cuts are expected to be slow in coming through.”