This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at https://www.theguardian.com/business/2016/jul/29/foxtons-profits-down-sharply-london-property-market-cools-brexit

The article has changed 7 times. There is an RSS feed of changes available.

Version 1 Version 2
Foxtons profits down sharply as London property market cools Foxtons profits down sharply as London property market cools
(about 4 hours later)
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. Profits at Foxtons fell by 42% in the first six months of the year as “uncertainty and confusion” caused by the EU referendum led to a slump in property sales, with the estate agent warning that the downturn in London’s housing market would continue at least until the end 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. 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”. Foxtons’ pre-tax profit dropped to £10.5m over the period, from £18.1m a year earlier. Property sales volumes were down by 10.2%, pushing revenues 7% lower to £31.3m. Lettings revenues also suffered in the run-up to the referendum on 23 June, declining by 2.7% to £32.6m. Foxtons scrapped a special dividend as it said the Brexit vote had caused a “prolonged period of further uncertainty”.
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.” Nic Budden, the Foxtons chief executive, told analysts and investors: “Certainly, interesting times in the first half ... As the EU referendum debate continued, uncertainty and confusion among customers and clients did lead to significantly weaker market conditions.
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. “We are anticipating relatively weak market volumes through to the end of the year. We’ll probably just take our foot off the pedal a little bit in 2017, naturally taking a more cautious approach to investment while the market settles down.”
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. Budden said Foxtons would scale back its aggressive expansion plans next year, after opening seven new branches this year. “It won’t be seven next year and it won’t be zero,” he said. Since floating on the London stock market in 2013, the company has opened between five and seven branches a year.
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. The Monday after the Brexit vote, Foxtons issued a profit warning, which sent its shares plummeting by 25%. The company’s share price fell by 10% to 111p on Friday, after trading 13% lower at one stage.
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.” “Given the unexpected nature of the vote, you saw quite a dramatic fall in new applicants in the week or two following [the] Brexit [vote] and exchanges slowed because people were trying to renegotiate deals,” Budden said. “That was a sharp decline, but that has stabilised and since then it hasn’t got any worse.”
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. Budden said he remains confident that Foxtons can increase its share of the lucrative London market, which currently stands at between 6% and 7%. “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.
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. Foxtons’ results came a day after a profit warning from Countrywide, the UK’s biggest estate agent. It said commercial and London residential transactions had stalled following the UK’s vote to leave the EU.
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, property website Rightmove and housebuilder Taylor Wimpey have shrugged off the impact of the Brexit vote, although they also warned of increased uncertainty and said it was too early to assess the long-term impact of the referendum result.
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. 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 and sellers anxiously awaited the outcome of the referendum.
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. The 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. 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.”
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 has been pushing into the capital’s outer zones to reduce its reliance on central London. The estate agent 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 in south London planned for September, in Peckham and Vauxhall, where the company will trial an offering of zero fees 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 past 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.” Laith Khalaf, a 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.”
House prices have so far defied the gloom brought on by the Brexit vote, rising by 0.5% in July, according to Nationwide, Britain’s biggest building society.
Neil Wilson, a market analyst at ETX Capital, said: “But prices are very different to activity in the housing market – strong demand and few sellers coming to the market could squeeze prices higher even if activity collapses.”