Real estate market insolvency figures suggest improvement

More than 100 firms involved in real estate activity entered insolvency in the first quarter of 2016, according to figures from the Insolvency Service.

Across England and Wales, 18 firms that dealt with the buying and selling of real estate faced insolvency, as did 44 that provided renting and operation owned, or leased real estate.

A further 39 who provided activities on a fee or contract basis relating to real estate also faced the same fate.

The situation marked an improvement on the first quarter in 2015 though, as there were 141 real estate insolvencies – meaning the figure for 2016 is 28.4% lower.

There were 417 real estate insolvencies across the whole of 2015, with numbers dwindling as the year progressed.

Of the 101 insolvencies in the first quarter of 2016, 23 were compulsory liquidations which represented the lowest number for six years.

It was also half the number recorded in the first quarter 12 months previously, suggesting an improvement in the sector overall.

Although the number of voluntary liquidations rose from 42 to 64 quarter on quarter, a marked improvement was still noted from when 77 faced such issues in the opening months of 2015.

The number of administrations also improved year on year, although not by quarter – 10 real estate firms faced administration, the same as in Q4 2015 but down from 18 in Q1 2015.

The real estate sector boomed between 2010 and 2016, as high market confidence, robust pricing, rising demand and favourable margins all played a part.

Alternative finance options also provided real estate firms with lending channels to fund growth, although new stamp duty, tax and borrowing regulations are now having an impact.

Should developers struggle to secure debt for projects or other funding, then higher levels of insolvency could be expected in the future.

By Phil Smith

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