Fewer people are buying and selling houses, prices are decreasing for the first time since 2009, while more people than ever are renting in the capital, and major London estate agent Foxtons is feeling the effects.
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During London’s boom years, Foxtons capitalised, expanded and thrived, as house prices soared and the market was more active than ever before. However, the pace of acceleration has been tapering off recently, with the capital posting a small drop in house prices last year and activity stagnating as more people choose to hang onto their homes while they adopt a “wait and see” approach.
Now, the estate agent has revealed that its profits have slumped by almost two thirds – 65% – in the year to December 2017, with total takings of £6.5m compared to the £18.8m it registered in 2016. The company has cited political uncertainty and its effects on consumer confidence as a contributing factor to the losses, as well as the stamp duty surcharge on second homes resulting in fewer transactions.
Revenue from sales took a major hit, down by 23% at £42.6m, while lettings saw a 3% loss down to £66.3m due to many landlords lowering their rents in the capital over the past year. The losses were potentially cushioned by the fact that around a third of London households are now living in private rented accommodation, significantly more than there were 10 years ago, meaning this side of the market is still relatively active.
What’s the plan now?
ETX Capital senior market analyst Neil Wilson said: “For Foxtons it’s all about how quickly the market in London turns around. There is a clear rationale for saying that the hot flows of capital that flooded London property and pushed up the pound in the years prior to the Brexit vote have cooled and won’t be warming up any time soon.
“While ultimately this could be positive and create a more sustainable property market in London, investors in Foxtons may have to accept that the rampant price growth in the capital that drove shares in the good times is a thing of the past.”
Foxtons has revealed that it will be looking at investing in technology in order to make its current offering more profitable, as well as focusing on the lettings market in line with the growing PRS sector. CEO Nic Budden commented that due to the future tightening of rules surrounding landlord regulation and taxation, it will be necessary for many landlords to recruit knowledgeable agents to “help with compliance and yield maximisation”, meaning there is still a place in the market for Foxtons.
He added: “Our brand is a cornerstone of the business prompting awareness and associating customers with consistent, high levels of service across our network. Technology can amplify these important areas and as our branch expansion is now complete, further investment can be made in our brand, people and technology to extend our market leading position.”