Foxtons warns of difficult outlook as interest rate hikes dampen property transactions

Foxtons has warned of a ‘more challenging’ trading environment in the coming months as it reported strong market performance for 2022.

The brokerage firm informed investors on Thursday that rising interest rates, inflation and deteriorating economic conditions would lead to a more ‘subdued’ sales market in the first half of this year.

Britain’s property sector has slowed since mortgage rates skyrocketed in the wake of the controversial ‘mini-budget’ in the autumn, which sent markets into turmoil.

According to the banking group Halifax, the estimated number of first-time buyers fell 11 percent last year, while average home prices have fallen for the past four calendar months in a row.

However, Foxtons said full-year revenue and adjusted operating profit for 2022 will beat market forecasts, with the former rising by around 11 per cent to £140 million thanks to growth in its rental, sales and financial services divisions.

The London-focused company attributed much of the profit increase to the divestment of Douglas & Gordon’s loss-making sales portfolio, which it only acquired last year.

It retained and integrated D&G’s rental division and three months later spent £10.6 million on the purchase of two estate agents – IMM Properties and Stones Residential – with approximately 2,500 leases, in line with a strategy to buy-out rental businesses.

Foxtons said rental income is expected to remain resilient going forward despite the broader economic backdrop.

Rents in England’s capital have risen to record levels amid rising mortgage costs, skyrocketing utility bills and a return of office workers and students after Covid-19 restrictions eased.

Prices have also been driven up by a drop in rental housing availability as landlords exited the market following the introduction of new taxes, such as changes to the stamp duty on owner-occupied properties and changes to rental laws.

“A lot has been achieved in a short time and it’s great to see some of the team’s hard work reflected in the 2022 results,” said Guy Gittins, who became Foxton’s CEO last September.

The economic outlook for the year ahead remains uncertain, but we have a growing portfolio of non-cyclical income and a refreshed operating strategy to rebuild Foxtons’ brokerage DNA and return the company to its position as London’s go-to company. -to real estate agency. ‘

Gittins succeeded Nick Budden, who faced a major shareholder revolt in 2021 over his compensation package after the company received nearly £7m in government-funded leave payments and business rates.

Foxtons also raised £22 million from investors during the early stages of the Covid-19 pandemic, as lockdown restrictions led to a collapse in property transactions.

Sales rebounded significantly after the first national lockdown ended, as Britons sought more spacious homes and demand for mortgages was boosted by low interest rates and the introduction of a temporary stamp duty holiday.

Foxtons Group Shares were down 0.7 percent at 37.75 pence late Thursday afternoon, but they’re still up about a quarter year-to-date.