Foxtons shares plunge 20% as London property market slows

Foxtons shares tumbled on Thursday after the notoriously aggressive London-focused estate agent chain warned that profits would fall this year because of a sharp slowdown in the capital’s property market.

In an unscheduled trading update, the company said sales commissions fell by 7.8% in the third quarter to £16.4m, helping to push earnings before tax, interest, debt and other items down 21% to £14.2m.

Foxtons shares fell nearly 20% to 165p. The estate agent floated on the stockmarket last September.

In its statement, Foxtons said: “Although the longer-term outlook for London property markets remains positive, the market is expected to continue to be constrained for some time due to political and economic uncertainty within the UK and Europe, tighter mortgage lending markets, and mismatches between the price expectations of buyers and sellers.”

Foxtons said that buyers had grown wary after prices in London rose almost 20% in the last year and were taking on board expectations that interest rates would start to rise next year. Mortgages are in short supply after the Bank of England imposed restrictions on lenders in an effort to cool the property market.

Labour’s adoption of a tax on properties worth more than £2m has also increased concerns about political intervention in the property market after next May’s general election. Estate agents reckon at least 80% of homes that would be subject to the tax are in London and the south-east.

Foxtons warned in August that the London property market was slowing down but the rate of decline took City analysts by surprise. Foxtons said the slowdown had increased since August and sales for the second half would be “significantly” lower than the same period last year.

Before Foxtons’s warning, analysts had expected annual earnings of £57m. They now predict a figure around £48m.

Foxtons’ initial public offering (IPO) in September 2013 was oversubscribed as investors sought to tap the London property market via the chain, which is infamous for its brash sales tactics and fleet of liveried Mini Coopers. The shares floated at 230p and hit a high of 399p in February but have hovered below their float price for the past month. BC Partners, the private equity firm that owned the majority of Foxtons before the listing, sold half of its remaining 14% stake in early September, when shares were above the offer price.

Nick Budden, Foxtons’ chief executive, tried to reassure investors by saying the company was free of debt and expected to return more cash to shareholders. Foxtons is sticking with its goal of opening between five and 10 new branches a year and expanding into hotspots outside London, such as Woking in Surrey, and Kingston upon Thames.