Foxtons warns lending crackdown and rate rise fears will slow property market but gives investors special dividend
- London-based estate agent said sales were up 30% in four months
- But it warns second-half of year cannot keep up with bumper first-half
- It will pay a special dividend after strong results
Shares in Foxtons crashed yesterday after the estate agent warned that the booming housing market is slowing down.
The company, which has 49 branches in London and Surrey, reported a 57.1 per cent jump in profits to £23.1m for the first half of the year after revenues rose by 16.2 per cent to £72.8m.
It proposed an interim dividend of 1.77p a share and a special payout of 2.77p as it took advantage of a 30 per cent rise in house sales in the first four months of the year.
Property slowdown: The London-based estate agents believes the bumper first half cannot be repeated
But Foxtons shares plunged 10.3 per cent, or 30.3p, to 264p after chief executive Nic Budden said the most recent data ‘suggests the market has cooled a little over the past couple of months’.
He blamed the prospect of higher interest rates and new rules to curb risky mortgage lending. Interest rates have been frozen at 0.5 per cent since March 2009 but are expected to rise late this year or early next year.
‘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,’ said Budden.
Foxtons’ shares are still trading above their 230p float price last September and the company is planning to open two more branches this year.
Chris Millington, an analyst at Numis Securities, hailed a ‘strong’ set of results despite the share price slump.
‘Whilst management expect the market to show a reduced rate of growth in the second half, the company should still make good progress due to new branch openings and the maturing of previously opened branches,’ he said.
Foxtons results: It said sales were up 30% in London in the first six months of 2014
House prices in London are around 20 per cent higher than they were a year ago with the ‘average’ home in the capital now costing nearly £500,000, according to the Office for National Statistics.
A poll by Reuters yesterday found that house prices across the UK are expected to rise by 9 per cent this year and 6 per cent next year as interest rate rises bite.
James Kingdon, at property consultant GVA, said: ‘Given that rates have been at 0.5 per cent for so long, many households will have to significantly adjust spending when rates go up.’
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