London estate agency Foxtons has cashed in on the capital's soaring property prices with a big increase in profit for the first half of the year – but its shares fell more than 10% as it warned that sales growth would slow.
Pre-tax profit rose 57% to £23m in the first six months of this year as strong sales and mortgage-broking fees sent revenue up 16% to £73m. Excluding debt repayments, which were higher a year earlier, and other items, earnings rose 29% to £25m.
Foxtons, known for its aggressive sales tactics and fleet of branded Mini cars, announced a special dividend of 2.77p on top of its interim dividend of 1.77p, allowing shareholders to cash in on London's booming property market.
But the firm, which floated on the stock market last year, said the booming business of the first half of 2014 would weaken as tougher rules on mortgage lending and the prospect of rising interest rates quelled demand.
Nic Budden, its chief executive, said: "Looking ahead to the second half, we expect the growth in transaction volumes to slow from the rapid rate seen in the first half as the policy initiatives introduced in 2014 aimed at controlling mortgage lending, together with the expectation of increases in interest rates, are now having an impact on short-term demand among buyers."
Foxtons shares lost more than 10% to 264p, making them the biggest fallers in the FTSE 350 index of leading shares.
The firm said the government's Help to Buy scheme, which underwrites mortgages, had increased demand for property in the past year. But critics have accused the scheme of fuelling a property bubble centred on London, where house prices have risen by about 20% in the past year.
The Bank of England has imposed constraints on mortgage lending and the Financial Conduct Authority has required tougher affordability tests to try to cool the market. Interest rates are also expected to rise from their all-time low next year.
Foxtons' rival Savills said on Tuesday that London price rises had smashed its forecasts and predicted growth of 5% in 2015, down from a forecast of 6%, and no growth in 2016. Savills said price rises would be stronger in the rest of the south-east and the east of England than in London over the next five years.
Foxtons opened five branches in the first half of 2014, in line with its plan to add about 10 branches a year until 2018. Trading almost exclusively in London, the company eventually wants to expand into the south-east.
