Foxtons hit by 'sharp slowdown' in London housing market

Estate agent says activity in the UK's capital over the second half of 2014 will be "significantly below" levels in the same period a year ago

London's white-hot property market is finally slowing down Credit: Photo: Justin Sutcliffe

Foxtons shares took a hammering on Thursday after it warned that profits will fall this year amid a "sharp slowing" in London's previously white-hot property market.

The estate agent said sales volumes in the July to September quarter were lower than in the same period last year and that it expected the market to remain "constrained". Shares in Foxtons fell as much as 20pc on the news.

It blamed the cool-down on "political and economic uncertainty within the UK and Europe" and the Bank of England's moves to tighten up mortgage lending. Foxtons also identified “mismatches between the price expectations of buyers and sellers” as a reason for the slowdown.

"These external headwinds have exacerbated the rate of slowdown in sales transactions we noted at the time of our [first half] results," it said in a statement.

Foxtons added that it expected sales volumes in the second half of 2014 to be "significantly below levels during the same period last year", meaning full year adjusted ebitda (earnings before interest, taxes, depreciation and amortisation) would be lower than the £49.6m it made in 2013.

Foxtons said the £16.4m it made in property sale commissions in the July to September quarter was 7.8pc lower than in the same period a year ago, as the reduction in sales volumes more than offset price increases.

This dragged total revenues, which also includes rentals and mortgage sales, down 3pc to £39.9m.

Nic Budden, chief executive, said Foxtons would nonetheless push through with its strategy to open new branches across the capital:

"Despite the impact that market uncertainty is having on transaction volumes, we are continuing with our clear strategy, centralised business model and steady roll out programme which is delivering higher market share," he said.

"Foxtons remains highly profitable, cash generative and debt free, and therefore well positioned to deliver further cash returns to shareholders, building on the £28.1m of ordinary and special dividends paid since our IPO."

Aymen Azizi, trader at Accendo Markets, remained sanguine about Foxtons' warning, saying that London's property market was "bulletproof".

"The stock is getting punished this morning but savvy traders are looking for an entry point noting that the third quarter is rarely the best [period] for estate agents," he said.

Foxtons' warning is the latest sign that the capital's property market is pausing for breath.

Earlier this week, high end estate agent Strutt & Parker said the total value of its third quarter transactions were 21pc lower than in the same period a year ago.

House prices as well as volumes are showing signs of a slowdown. Last week, a major survey by Royal Institution of Chartered Surveyors indicated that house prices in the capital had fallen for the first time in more than three years.

The recent slowdown in the London property market has followed an extraordinary run in which volumes of house sales hit their highest since before the financial crisis and prices recorded annual increases of as much as 21pc.

Foxtons Estate agents car with an x-ray skeleton livery paint job

Foxtons' Minis are very recognisable around London. Photo: Rex