Numbers of property firms in a ‘red flag’ state of ‘critical financial distress’ leapt 19% this year, shocking new figures reveal.

In response, a leading insolvency expert has now predicted many companies will go bust or be bought by larger agencies.

During the first three months of this year, the total of ‘real estate and property services’ businesses in ‘critical’ distress jumped to 7,719, according to consultancy BTG.

Its latest ‘Red Flag Alert’ research found that companies in ‘significant’ difficulties rose 15% year-on-year to 79,118.

The impact of the war in the Middle East may already starting to be felt by this sector.”

War impact

The findings mean property industry businesses rank third on the list of 22 sectors monitored behind Construction and Support Services.

Julie Palmer, Managing Partner at BTG (formerly Begbies Traynor), (main picture)says: “The impact of the war in the Middle East may already starting to be felt by this sector.

“Real estate had only just started adapting to or seeing the true impact on distress of increased tax burdens for businesses.

Closure

“But with these challenges now exacerbated, we will inevitably see the emergence of winners and losers across real estate, with a number of firms being pushed towards and over the edge of closure.

“One potential outcome is that larger groups will have the means and the motive to sweep up the distressed property firms”.

More dominant

Meanwhile, Anthony Spencer, National Managing Partner at BTG Eddisons, says: “The Renters Reform Bill has seen private landlords selling up with larger, professional landlords becoming more dominant and despite showing some resilience in the past year the market for sales is now feeling the challenges of uncertainty on interest rates.

“In these conditions we are seeing property auctions growing in popularity for both sell and buy side.”