Multiple Branch Closures Show Tough Year for UK Estate Agencies

2023 saw almost 5,000 property sales and letting branches close as a result of the UK’s difficult economic climate.

A recent report on the state of the property market published by TwentyCi, explains that “for the first time since the pandemic, 2023 experienced a significant increase in the volume of branch closures in the UK” among estate agencies. Alongside the 2,893 estate sales branches that closed their shutters was 1,906 lettings agencies.

As we’ve seen across many other sectors, the economic landscape has been incredibly challenging for most businesses, especially those with bricks and mortar premises. These companies have had to absorb spiralling energy costs and stratospheric rent increases owing to both Russia’s invasion of Ukraine and increases in UK mortgage rates that have been passed on to tenants.

Those same high energy prices and mortgage rates have had an impact on how many houses are being sold too. While house prices themselves have stayed fairly steady, the amount of actual sales agreed across the UK fell by 12% compared to 2022. With the cost-of-living crisis causing many to cut back on their expenses, few are keen to increase their bills by purchasing a bigger, or newer property. Likewise, economic conditions have made it much harder for first-time buyers to save up for a deposit while still trying to pay their existing bills.

Changes in the rental landscape

Lettings agencies meanwhile, have seen trade hit by a shortage of rental properties available. Current numbers of available rental properties have sat at an all-time low for the last few years, and while there was a small 5% increase in these figures from last year, numbers are still 22% lower than they were in 2019.

Rick Smith. Managing Director of Forbes Burton suggests that “with mortgage rates jumping up by hundreds of pounds over the last few years, many buy-to-let landlords will have seen their tenants’ rents barely clear their mortgage payments. This could well have prompted the decline in rental numbers, as landlords have decided it’s more financially prudent to sell their properties instead.

“While rents are higher than ever before as a consequence, this is unlikely to mitigate the loss of so many properties from the lettings market for agencies specialising in rentals. This, combined with the cost of running a bricks and mortar store currently, will understandably cause some to struggle”.

Indeed, despite dozens of people typically vying for each property, demand for rentals has actually shrunk by 18% since 2019. Unfortunately, that move away from rentals hasn’t seen a significant increase in house purchases for sales agencies.

Estate sales agencies with physical premises have had another factor to consider in their struggles to remain on the high street. Online and self-employed estate agents now almost 13% of all new instructions, and have gained a firm market share among their more established rivals. For sale signs from brands such as Purplebricks and Yopa are now commonplace on UK streets, and their use has grown 500% since 2019. With less overheads to contend with, this model provides food for thought for the traditional estate agency.

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