Foxtons has crashed to a loss after struggling to sell houses in London’s sagging property market, as concern grows of wider problems facing Britain’s estate agencies.
Later this week Countrywide, the UK’s biggest independent agency, is also expected to report grim sales figures and an emergency cash call on investors to help pay down £200m of debt.
The agency, which operates 50 high street brands, including Hamptons International and Bairstow Eves, will report delayed results to the City on Thursday. It has issued four profits warnings in recent months and its shares have fallen from 250p to 45p in the past two years.
Foxtons plunged to a loss of £2.5m in the first half of 2018 compared with a £3.8m profit this time last year as a result of turmoil in the London property prompted by Brexit fears and higher stamp duty. The agency, best known for its heavily branded Mini Coopers and steep commission charges, sold only 1,188 properties in the first half – down by a quarter from the same period last year.
The collapse in sales is a stunning reversal from the bumper profits and special dividends Foxtons paid shortly after it launched on to the stock market in 2013. By early 2014 its share price had climbed to 399p, valuing the company at more than £1bn. Meanwhile, glossy new branch openings in areas where prices were rising fast prompted protestors to daub “yuppies out” on the agency’s windows. Its share price languishes at around 50p and the expansion of the branch network has ground to a halt.
The downturn in transactions in London’s previously supercharged property market since the June 2016 EU referendum has hit estate agents far more than price falls. Foxton’s chief executive, Nic Budden, said: “The property sales market in London is undergoing a sustained period of very low activity levels with longer and less visible transaction outcomes.”
Budden reassured investors that “we remain confident of our long-term prospects” but a separate report from the National Association of Estate Agents this week underscored how tough life has become for agencies – not only in London but across the UK.
It said sales per estate agency branch were down 18% in June compared with the same month last year, while the number of people registering to buy has fallen by 12%.
In recent weeks some property experts have said that the London market has bottomed out but on Monday LCP, which specialises in high-end property in the capital, said its latest assessment spells “more gloom … among concerns of a chaotic Brexit and an increase in property down-valuations”.
It said prices in “prime” central London in June fell by 8.2% compared with this time last year. “They are currently no higher than they were almost four years ago, in a market that has enjoyed annual average growth of 9.9% since 1996.”
In the rest of the capital it said prices were up by 0.6% but transactions fell by 8%, dropping to levels last seen during the great financial crash.
Estate agencies are pinning their survival on their letting arms, which have been hit far less seriously by the downturn in the sales market, although they also face the challenge of new online competitors promising lower commissions.
Foxtons said income from its lettings business slipped by only 1% in the first half of 2018, falling to £31.7m from £32.1m, although the typical rent achieved for landlords was 2% down over the period.
Budden said: “The lettings market continues to be extremely competitive but is a stable and reliable business for the group and now represents 60% of our revenues.”
Earlier this month a report from the accountants Moore Stephens found that more than 150 estate agency firms became insolvent last year and as many as 7,000 are at risk as high street operators face the triple whammy of online competition, a sagging property market and cuts to letting fees.