British estate agent Foxtons warned profits would fall this year because of a marked slowdown in London’s previously runaway property market, sending its shares tumbling by a fifth.
Foxtons, which has become a symbol of the British capital’s property boom, said sales volumes had fallen sharply and commissions were down in the third quarter. Sales had hit their highest level since the 2008-09 financial crisis peak in the previous nine months.
Known for its coffee shop-style offices and fleet of Mini Cooper cars bedecked with union flags, Foxtons said tougher lending rules and worries over British and European political stability had hit the market.
After reporting a three per cent dip in third-quarter turnover and warning 2014 core earnings would also fall, investors wiped over 100 million pounds (€126m) off the company’s valuation in the biggest daily fall since Foxtons listed in September 2013.
“We now believe that market volumes in the second half of 2014 overall will be significantly below levels during the same period last year,” the company said. “The market is expected to continue to be constrained for some time.”
Prices for everything from sumptuous mansions to parking places have soared in the capital over the past two years. With one bedroom flats in central London now costing around half a million dollars, some have warned the market is overheating.
Analysts at Jefferies said Thursday’s figures showed the dangers of focusing a business around a single market.
Inflation in London’s heady market is falling behind other parts of England as house-hunters who can no longer afford to live in the city look elsewhere, recent surveys indicate.
London lost its top place as Britain’s fastest growing market in October, according to according to property website Rightmove despite prices rising seven per cent to an average of €756,000, a new record.
“The ripple effect of buyers priced out of London combined with those cashing in and moving out of the capital mean that the South East has taken London’s boom-town crown,” Rightmove director Miles Shipside said in its monthly price index.
In a further sign of how hard it is to borrow money for house purchases, British mortgage approvals also fell to the lowest level in just over a year, data showed.
Chief executive Nic Budden said that despite the sudden change in Britain’s biggest housing market, the firm still planned to return more cash to shareholders.