LSL shares tumble 10% as it warns of rise in home sales falling through
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Shares of brokerage group LSL plummet after owner of Your Move warns of profits as home sales slow and cancellations rise
- Trading conditions more ‘challenging’ due to rising prices and uncertainty
- LSL reported a decline in mortgage activity and new home sales
- It has also seen an increase in the failure rate of previously agreed sales
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LSL Property Services has warned that full-year earnings will be lower than expected after witnessing a slowdown in demand and falling sales growth.
The group behind brokers Your Move and Reed Rains said trading conditions have become “more challenging” since the first half of the year as rising interest rates and political uncertainty disrupt the housing market.
“This has led to a reduction in mortgage activity and new home sales across the market, and an increase in falling out of previously agreed sales,” CEO David Stewart told investors Friday.
LSL blamed the disruption caused by September’s mini budget and higher mortgage rates for a slowdown in new home sales
Group turnover in the ten months to the end of October was slightly higher at £276.1m, thanks to a strong performance in the surveying business, but the brokerage business saw a 6% drop.
The company, which also provides advisory services to mortgage brokers, now expects overall group performance to remain below previous expectations.
It said full-year earnings are expected to be “in a range just above or just below that of 2019,” having previously predicted a stronger performance.
LSL shares fell 11 percent to 233 pence during afternoon trading on Friday, sending the stock down nearly 44 percent from a year ago.
The housing market is strongly influenced by sentiment and has the potential to surprise positively.
“However, with the recent decline in activity levels and continued uncertainty about economic conditions in the UK, we are cautious on the market outlook for 2023 until we have more clarity on the economic backdrop.
“A significant reduction in residential transactions would clearly have a material effect on our residential real estate brokerage and our direct-to-consumer financial services.”
The update echoes Aviva’s recent research, which found that the cost-of-living crisis has forced more than a million hopeful first-time buyers under 45 to put their plans on hold.
September’s disastrous mini-budget and resulting rise in mortgage rates has been repeatedly blamed for a slowdown in the housing market.
Last week, Zoopla reported a £4,000 drop in average home asking prices between October and November.
And said the sharp rise in the cost of borrowing caused by the mini-budget accelerated a slowdown in market activity that had already begun in the summer.