The UK property market is witnessing a significant rise in insolvencies among property businesses, with landlords particularly hard-hit. According to a recent analysis by Mazars, an audit, tax, and advisory firm, there has been a 16% surge in the number of property firms facing bankruptcy in the last year alone.
The Rise in Property Business Failures
Mazars’ report highlights a concerning trend: 738 property businesses have collapsed in the 12 months leading up to September 30th. This is a notable increase from the 634 businesses that fell into insolvency the previous year. The details of the report shed light on the varying impacts across different sectors within the property industry.
Landlords Bearing the Brunt
The spike in insolvencies has been particularly pronounced among landlords, with a 35% increase reported. This considerable upsurge is indicative of the challenges landlords are facing in the current economic climate.
Real Estate Agents Under Pressure
The number of estate agent businesses declaring bankruptcy has risen by 11%. This figure reflects the decreased sales and rental activity that is putting substantial pressure on estate agents.
Developers in Difficulties
Developers are not immune to the ongoing challenges, with a 4% rise in the number of insolvencies. While smaller than the increases seen by landlords and estate agents, this still signifies difficulties within the development sector of the property market.
The Impact of Rising Interest Rates
A key factor driving these insolvencies is the increase in interest rates, which has led to higher mortgage repayments. This has placed a considerable strain on landlords and developers who are struggling to manage their debts. In some cases, this has forced them to sell their property assets at less favorable prices.
The Market Downturn and Its Consequences
Rebecca Dacre, a partner at Mazars, pointed out that the property sector has been “hit particularly hard” in recent years. The downturn in the property market has led to a decrease in the value of properties, leaving those with secured debts with fewer options for negotiation.
The Residential Market Squeeze
The rise in insolvencies among landlords is expected to have a knock-on effect on the residential market. As more rental properties are taken off the market, prospective tenants will find it increasingly difficult to find suitable accommodation.
A Decade-High Level of Company Insolvencies
Adding to the concern, the Insolvency Service has reported that company insolvencies have reached their highest level since 2009. This is a clear indicator of the broader financial pressures that are affecting UK businesses, including those in the property sector.