Foxtons expects falling mortgage rates to boost the UK property market in the second half of 2023
- Home sales in the UK fell after the mini-budget pushed up mortgage rates
- The group said a typical home purchase takes more than four months to complete
- Most of Foxtons’ revenue growth last year came from the rental business
Estate agent Foxtons has said falling mortgage rates could lead to a more robust housing market in the second half of this year.
Demand for property in the UK started to fall from its recent highs last September, due to then Chancellor Kwasi Kwarteng’s mini budget, which pushed up mortgage rates and hurt consumer confidence.
This led to a decline in Foxton’s undercut sales pipeline, with a typical home sale taking more than four months to complete.
Optimistic forecast: Estate agent Foxtons has said falling mortgage rates could result in a more robust housing market in the second half of this year
Group sales rose just 1 per cent to £43.2 million last year, while the average sales price increased by £13,000 to £590,000.
But Foxtons said on Tuesday that falling mortgage rates in recent weeks has led to more buyer inquiries and could lead to a more favorable sales market by the end of 2023.
The London-focused group also expects the UK rental sector to be propped up by high prices due to demand outpacing supply in the near term.
Most of Foxtons’ revenue growth last year was driven by the rental business, mainly driven by a 25 percent increase in revenue per rental transaction offsetting a decline in sales volumes.
Private rents will rise by about a fifth by 2022, according to Foxtons, as rising borrowing costs prevent many Britons from buying homes and the easing of Covid-19 restrictions saw workers and students return to the capital.
Rents have also been pushed up by a housing shortage, skyrocketing energy bills and landlords exiting the rental market.
Foxtons’ revenues were further boosted by the acquisitions of the Douglas & Gordon rental portfolio, which was purchased in mid-2021, and estate agents Gordon & Co and Stones Residential acquired last May.
Combined with the sale of the loss-making D&G sales division, this helped the company return to a profit of £9.6m after a loss of £1.3m in the previous 12 months.
Investors will receive a final dividend of 0.7 pence per share, doubling the group’s dividend payments over the previous year.
Chief executive Guy Gittins said the company had made “good financial progress,” adding that it had “strong” underlying fundamentals to deliver further growth.
After Gittins acquired Foxtons from rival Chestertons six months ago, Gittins launched a now-completed review that he said had already led to improvements in front-end operations.
He added: “Core operational shortcomings have throttled historic performance and prevented significant unfulfilled potential from being realised.
“Operational improvements are being made at a rapid pace to rebuild our competitive advantages, including embedding a more confident articulation of our brand, investing in revenue-generating headcount and enhancing our data platform to fully leverage the power of our industry-leading database .’
Foxton’s stock were up 4.4 percent on Tuesday afternoon at 43 pence, meaning their value is up about 42 percent so far this year.