Foxtons warns of ‘challenging’ months ahead as inflation and interest rate hikes weaken property transactions
- The firm said its annual turnover for 2022 are set to exceed market forecasts
- Foxtons boss: ‘The economic outlook for the year ahead remains uncertain’
- Mortgage rates escalated in the aftermath of a controversial ‘mini-budget’
Foxtons has warned of a ‘more challenging’ trading environment in the months ahead, as it reported a strong market-beating performance for 2022.
The estate agency told investors on Thursday that rising interest rates, inflation, and harsher 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 spriralled in the aftermath of the controversial autumn ‘mini-budget,’ which caused chaos across the markets.
Outlook: Foxtons said that rising interest rates, inflation, and harsher economic conditions would lead to a more ‘subdued’ sales market in the first half of this year
According to the banking group Halifax, the estimated number of first-time buyers fell by 11 per cent last year, while average house prices have declined for the last four consecutive calendar months.
However, Foxtons said its annual turnover and adjusted operating profit for 2022 are set to exceed market forecasts, with the former increasing by around 11 per cent to £140million thanks to growth in its lettings, sales and financial services divisions.
The London-focused firm attributed much of the earnings boost to the divestment of the loss-making sales portfolio of Douglas & Gordon, having only acquired it the previous year.
It held onto and integrated D&G’s rental arm and spent £10.6million purchasing two estate agents – IMM Properties and Stones Residential- with around 2,500 tenancies three months later, in line with a strategy to buy up lettings businesses.
Foxtons said lettings revenues are anticipated to remain resilient going forwards despite the broader economic backdrop.
Rents in England’s capital have soared to record levels amid surging mortgage costs, skyrocketing energy bills, and a return of office workers and students after Covid-19 restrictions were relaxed.
Prices have also been pushed up by a slump in the availability of rental properties as landlords exited the market following the introduction of new taxes, such as stamp duty changes on buy-to-let homes, and changes to tenancy regulations.
‘Much has been achieved in a short period, and it is great to see some of the team’s hard work reflected in the 2022 results,’ said Guy Gittins, who became Foxton’s chief executive last September.
‘The economic outlook for the year ahead remains uncertain, but we have a growing portfolio of non-cyclical revenues, and a refreshed operational strategy to rebuild Foxtons’ estate agency DNA and return the business to its position as London’s go-to estate agency.’
Gittins succeeded Nick Budden, who faced a major shareholder rebellion in 2021 over his compensation package after the company received almost £7million in publicly-funded furlough payments and business rates relief.
Foxtons also raised £22million from investors during the early stages of the Covid-19 pandemic when 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 spurred by low interest rates and the introduction of a temporary stamp duty holiday.
Foxtons Group shares were 0.7 per cent lower at 37.75p on late Thursday afternoon, yet they have still expanded by around a quarter so far this year.