Shares in struggling London estate agent Foxtons took a dive today after it admitted London's cooling market pushed down profits last year.
Revenues fell 11 per cent to £132.7m in the year to the end of December, Foxtons said today – while pre-tax profits fell more than half, from £41m in 2015 to £18.8m in 2016.
Lettings revenue fell one per cent to £68.3m, while sales revenue fell 23 per cent to £55.5m. However, revenue from its mortgage broking business rose seven per cent to £8.9m, although the company put that down to higher volumes in the first half of the year ahead of stamp duty changes.
Falling revenues couldn't stop it from opening new branches, though – it opened seven new locations in 2016, and a further two in February this year.
A final dividend of 2p didn't impress investors: shares opened three per cent lower, at 94.75p.
Why it's interesting
There's a much fevered debate over whether house prices have been hit by the Brexit vote – but there's no disputing the fact that in the capital, things have slowed down.
Foxtons said today it had experienced a "marked step down in activity in the second half", which it attributed to the twin challenges of the EU referendum and a change to stamp duty rules which punishes the buyers of top-end properties, ie. its customers, and landlords, ie. its customers.
"The market remains tough, especially in central London," it added. And it doesn't look like things are getting better: figures published last week suggested prices actually fell in three of Foxtons' most important markets in January.
Still, at least Foxtons can take solace in the fact it's not the only one having trouble. Yesterday rival estate agent Savills warned the current rate of house price growth is not sustainable in the UK – while on Monday housebuilder Barratts took the unusual step of bundling together 172 unsold flats at various developments across the capital and selling them off as rental homes.
What Foxtons said
Chief executive Nic Budden said:
Last year's London property market was severely impacted by an unprecedented sequence of events with changes to stamp duty and the EU referendum vote leading to a substantial reduction in property sales transactions, especially in Central London.
We were not immune to the decline in volumes… We expect trading conditions to remain challenging throughout 2017. Should current sales activity continue through the remainder of this year, it is likely that 2017 sales volumes will be below last year.
What analysts said
Anthony Codling, equity analyst at Jefferies:
Foxtons remains the rock and roll story in the UK’s traditional estate agency market, with a focus on London, the slick speedboat that is Foxtons may well be nimble, lean and fast moving, but it can't out run the tides of change.
As ever, Foxtons is not taking the current challenges lying down and it will emerge stronger fitter and leaner than before, but we suspect that the London housing market will see more challenges in 2017 than the UK as a whole. However the speedboat is a state of the art one and is not going to sink, but for the time being the ride will be choppy.
A difficult year for an estate agent whose focus remains on one of the toughest parts of the market.