Research from restructuring and insolvency legal firm Moore Stephens found 19% of estate agents registered as limited companies are exhibiting warning signs that indicate they are at risk of going insolvent.
The analysis of Companies House records showed that 4,928 estate agents out of a total 25,560 had signs of financial distress.
Online estate agencies such as PurpleBricks, House Simple and Emoov threaten to squeeze profit margins of some high street estate agents with their higher property and staff costs.
The growth in property websites has also undermined the role of estate agents as an essential part of the process.
A report by HSBC found the overwhelming majority of British house buyers used online methods when researching and buying property, and that this was likely to result in the home buying and advice process to change beyond recognition.
Websites such as Zoopla and Rightmove make it easier for potential buyers to browse and view homes – without the help of a professional, said Moore Stephens.
Larger agencies like Countrywide and Connells have million pound advertising and marketing budgets increasing their market share and overall, despite 1.7m sales in 2006/7, property sales have since dropped 32% to 1.2m sales in 2016/17 with more people redeveloping properties instead of moving.
Mike Finch, restructuring and insolvency partner, said: “Traditional high street estate agents’ profit margins are being squeezed from both sides – from cut price online competitors, to their larger counterparts on the high street – who are forcing them to up their spending or give up the race.
“Many areas across the UK are over-saturated with estate agents, and competition is becoming too much for some smaller businesses,” he warned.