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Foxtons profits down sharply as London property market cools Foxtons profits down sharply as London property market cools
(about 1 hour later)
Estate agent Foxtons has posted a 42% drop in half-year profits as uncertainty caused by the EU referendum led to a sharp slowdown in London property sales, and warned that the downturn in the capital’s housing market would last for at least the rest of 2016. Estate agent Foxtons has posted a 42% drop in half-year profits as uncertainty caused by the EU referendum led to a slump in London property sales, and warned that the downturn in the capital’s housing market would last for at least the rest of 2016.
The London-focused firm’s profit before tax fell to £10.5m in the first six months of the year, from £18.1m a year earlier. Revenues from property sales dropped 7% to £31.3m, while lettings revenues were also affected by the uncertainty caused by the referendum, declining 2.7% to £32.6m. Foxtons cancelled a special dividend. The London-focused firm’s profit before tax fell to £10.5m in the first six months of the year, from £18.1m a year earlier. Property sales volumes fell 10.2%, pushing revenues 7% lower to £31.3m. Lettings revenues also suffered in the run-up to the referendum on 23 June, declining 2.7% to £32.6m. Foxtons scrapped a special dividend, as it warned that the Brexit vote had caused a “prolonged period of further uncertainty”.
Nic Budden, Foxtons’ chief executive, said: “The result of the referendum to leave Europe is likely to lead to a prolonged period of further uncertainty and we do not expect London residential property sales markets to show signs of recovery before the end of the year. Nic Budden, Foxtons’ chief executive, told analysts and investors: “Clearly, interesting times. We are anticipating relatively weak market volumes through to the end of this year. We’ll probably take our foot off the pedal a little bit next year, naturally taking a more cautious approach to the business while the market settles down.”
“However, longer term, while recent political events have produced uncertainty for buyers and sellers, we expect London to remain a highly attractive property market for sales and lettings and we remain committed to our goal to reach 100 branches across greater London.” He said the unexpected referendum outcome immediately triggered “quite a dramatic fall” in sales and lettings applicants, and prompted many buyers to renegotiate deals. “That was a sharp decline but that’s stabilised,” he added.
Foxtons said it would open fewer new branches next year if the downturn persists. Since floating on the London stock market in 2013, it has been opening five to seven branches every year. The Monday after the referendum, Foxtons issued a profit warning, which sent its shares down 25%. The company’s share price dropped nearly 8% to 114.28p on Friday.
The company’s share price dropped nearly 5% in early trading to 118p. Budden said Foxtons would scale back branch openings next year, after opening seven this year. “It won’t be seven next year and it won’t be zero.” Since floating on the London stock market in 2013, it has been opening five to seven branches every year.
He added: “Longer term, while recent political events have produced uncertainty for buyers and sellers, we expect London to remain a highly attractive property market for sales and lettings and we remain committed to our goal to reach 100 branches across greater London.”
The news comes a day after a profit warning from Countrywide, the UK’s biggest estate agent. It said that commercial and London residential transactions had stalled after Britain voted to leave the European Union.The news comes a day after a profit warning from Countrywide, the UK’s biggest estate agent. It said that commercial and London residential transactions had stalled after Britain voted to leave the European Union.
However, property website Rightmove and Taylor Wimpey, a major housebuilder, have shrugged off the impact of the Brexit vote, although they too warned of increased uncertainty and said it was too early to assess the long-term impact.However, property website Rightmove and Taylor Wimpey, a major housebuilder, have shrugged off the impact of the Brexit vote, although they too warned of increased uncertainty and said it was too early to assess the long-term impact.
The year had started well for Foxtons. Revenues in the first quarter hit a record high as property investors rushed to complete deals before the introduction in April of additional stamp duty for buy-to-let properties and second homes.The year had started well for Foxtons. Revenues in the first quarter hit a record high as property investors rushed to complete deals before the introduction in April of additional stamp duty for buy-to-let properties and second homes.
However, this was followed by a sharp fall in sales in the second quarter as potential buyers sat on their hands ahead of the 23 June referendum. As a result, Foxtons said the number of property sales made in London during the first half of the year was substantially down on last year. However, this was followed by a sharp fall in sales in the second quarter as potential buyers and sellers anxiously awaited the outcome of the 23 June referendum. As a result, Foxtons said the number of property sales made in London during the first half of the year was substantially down on last year.
Jefferies analyst Anthony Codling said: “With a focus on London, Foxtons has to bear the consequences of betting everything on red, rather than the more balanced approach of its listed rivals.Jefferies analyst Anthony Codling said: “With a focus on London, Foxtons has to bear the consequences of betting everything on red, rather than the more balanced approach of its listed rivals.
“Expanding in a contracting market is proving even too difficult for Foxtons and growth plans are being reviewed,” he added. “Perhaps a sign of the times, but even with first half profits of £10.5m the stock market value of Foxtons is less than that of the challenger low-cost estate agent Purplebricks, which has yet to turn a profit, recently delivering a full year loss of £11.9m.”“Expanding in a contracting market is proving even too difficult for Foxtons and growth plans are being reviewed,” he added. “Perhaps a sign of the times, but even with first half profits of £10.5m the stock market value of Foxtons is less than that of the challenger low-cost estate agent Purplebricks, which has yet to turn a profit, recently delivering a full year loss of £11.9m.”
The estate agent opened five new branches in the first half of the year, in Loughton, Sutton, New Malden, Fulham and Maida Vale, taking its total to 63 branches. There are two more branch openings planned for the second half: in Peckham and Vauxhall in south London. Foxtons has been pushing into London’s outer zones to reduce its reliance on central London. It has opened five new branches in recent months, in Loughton, Sutton, New Malden, Fulham and Maida Vale, taking its total to 63 branches. There are two more branch openings planned in September, in Peckham and Vauxhall in south London, where the company will trial a zero fee lettings campaign, offering a zero fee to landlords for the first 12 months.
Foxtons noted that London had experienced a significant shift, with nearly 30% of households now living in private rented accommodation, double the rate seen in the last decade. Competition in lettings has intensified as the number of agents has more than doubled.Foxtons noted that London had experienced a significant shift, with nearly 30% of households now living in private rented accommodation, double the rate seen in the last decade. Competition in lettings has intensified as the number of agents has more than doubled.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “If the Brexit negotiations don’t go well, the London property market is probably first in the firing line because financial jobs could move out of the city. However, at this early stage it’s far too early to judge the likelihood of this happening.”