Investment bank RBC Capital has downgraded its rating of Rightmove and is warning that the property market is entering a prolonged downturn with agency closures on the horizon.

The bank has cut Rightmove’s share price target from 550p to 440p.

In an advice note to investors it warns: “The likelihood of an immediate, sharp impact on the property market from Covid-19 extending into a drawn-out period of weakness has increased, in our view. As such, we expect an acceleration in estate agent closures and greater pressure on Rightmove’s Average Revenue Per Agent [ARPA, a key measure] near term.”

It goes on to say: “Rightmove’s pricing power may be undermined by a downturn. Rightmove’s ARPA has increased almost four-fold in the last 10 years and now represents circa five per cent of an agent’s revenue …

“We are concerned that this degree of price rises many not be sustained going forward, particularly in light of negative press coverage Rightmove continues to receive from disgruntled agents and more aggressive competition from number two player Zoopla.”

In its most stark warning to the industry as a whole and the leading portal in particular, the bank continues: “The Covid-19 crisis may act as a catalyst forcing agents out of business and undermining Rightmove’s ability to resume annual seven to 10 per cent prices rises in the future.”

The bank assumes that Rightmove’s current discount given to agents during the virus crisis will impact seriously on revenue, and it anticipates a six per cent decline in the number of advertisers.

This compares to a 13 per cent fall during the credit crunch over a decade ago.