The commercial and domestic property markets have long been seen as the bedrocks for economic growth throughout the UK. 

So given this importance, how has the real estate industry fared in the past few years as the pandemic and subsequent lockdowns and cost-of-living crisis have impacted them along with wider economic conditions such as interest rate rises and cuts.

As of August 2024, the average house price in the UK is £292,924 and with interest rates coming down and further cuts likely to take place in November and beyond, this would appear to be a great time to be in the business of trading property. 

So why are real estate insolvencies at their highest levels in over six years? 

The recent story for Real Estate 

Year2018201920202021202220232024 (Jan to Aug)
No. of Insolvencies370493368414720748497

Figures from The Insolvency Service 

Low sales and lettings volumes saw the number of real estate agents that have gone insolvent increase by 32% over the last 12 months.

Reflecting on previous years we can see the number of insolvencies began to peak following the Covid-19 pandemic, where they rose by 12.5% from 2020 to 2021. 

In 2022 there was another sharp increase of 73.9% in the number of real estate associated insolvencies, primarily blamed on an increase in the interest rates. This continued to impact the following year with a further 2.7% rise. 

What financial problems are real estate agents facing? 

Most of the key factors that are impacting the success of real estate agents is closely tied to the broader economic trends and changes in the housing market. Such as: 

  • Higher Interest Rates 

At the beginning of 2022 there was a sharp hike in interest rates causing a rise in mortgage prices. This was significant as it discouraged potential buyers, especially first time buyers, from entering the market. Even though they have reduced since, this initial shock made it less attractive for current homeowners to sell their properties as they might not want to trade a low-interest mortgage for a higher one. 

  • Low Inventory 

With fewer homes for sale, real estate agents have less inventory to show prospective buyers, leading to fewer transactions.  

According to data from HMRC, there was 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. 

  • Tougher Competition 

With the market becoming tighter, many agents are competing over a smaller pool of available clients and listings. While established agents may still thrive, newer agents may find it harder to build up business and secure listings. 

  • Changes in buyer behaviour 

Millennials and Gen Z buyers are often waiting longer to purchase homes and opting to live with their parents for longer. New data shows that 87% more adults between the ages of 25 to 34 are living with their parents compared to 20 years ago. 

With home prices steadily increasing since 1963, and the average proportion of a person’s income that goes to rent is now 40%. Gen Z and Millenials are struggling to afford the deposit required. In fact two-thirds of aspiring millennial homebuyers have not been able to save enough money for a down payment.

This combined with stricter lending standards, makes traditional home-buying processes less effective for younger buyers. Further reducing the pool of interested buyers. 

  • Rising operational costs 

In addition to market pressures, the costs of running a real estate business have increased, with many agents facing higher expenses for marketing, staging, and other client services. Combined with fewer closings, these expenses can quickly cut into profits.

So while the real estate industry looks buoyant on the surface especially compared to industries such as construction, hospitality and retail, those high insolvency figures tell a story that this success is by no means universal.

This is why we offer a free consultation to any business owner or director in real estate or any industry who wants to explore what options they have to help their business reach their goals in the next few months. 

Once our advisors get a good understanding of the situation your business is facing then they will be able to work with you to provide a range of options suited to you to help improve your outlook or performance in the short and medium terms. 

Alternatively, if restructuring or closure might be better options, then they can discuss who these can be done as quickly and efficiently as possible and what benefits they would offer directors. 

The sooner you get in touch with us, the sooner we can help you get things moving.