Foxtons shares rose sharply on Thursday after the estate agency bolstered its full-year guidance following a bumper third quarter.
The London-focused group said revenues rose 25 per cent to £43.8million over the period. Revenue for the nine months to the end of September was up 11 per cent on the prior year, at £108.9million.
Sales revenues increased by 44 per cent to £11.9million, while lettings revenue saw an 18 per cent jump to ££29.2million and financial services revenue was 37 per cent higher at £2.8million.
On the up: Foxtons saw its share price rise sharply today as group lifted its full-year outlook
Foxtons shares rose over 15 per cent earlier today and were up 11.61 per cent or 3.35p to 32.20p in late morning trading, having fallen over 30 per cent in the last year.
In lettings, growth was driven by a 23 per cent increase in average revenue per transaction, as higher average rental prices and longer tenancies offset a 9 per cent drop in lettings volumes.
Foxtons said rental price growth was underpinned by strong domestic tenant demand, and growth in international tenants and corporate relocations over the summer months, while rental stock levels remain constrained.
A sharp upturn in demand for rental properties in London this year has triggered a dearth in supply and rapidly rising rental costs for hard-pressed tenants.
The group’s lettings income also rose after it snapped up two smaller rivals, Gordon & Co and Stones Residential, earlier this year.
In the sales division, there was a 39 per cent upturn in volumes and a 2 per cent increase in average revenue per transaction.
Foxtons said higher volumes were driven by a more normalised market in the third quarter compared to the prior year, which was impacted by the pull forward effect of the 30 June stamp duty holiday deadline.
Guy Gittins, chief executive of Foxtons, said: ‘We enter Q4 with a less certain sales market backdrop, but cost action taken in H1 and our resilient lettings and financial services businesses leave us positioned to weather further macroeconomic and political challenges.’
Victoria Scholar, head of investment at Interactive Investor, said: ‘Foxtons is grappling with the recent surge in mortgage rates driven by the Bank of England’s rate hiking path and accelerated by the Chancellor’s mini-budget fiasco.
‘The increased mortgage costs are having a sharply negative impact on demand for houses and flats, which is likely to weigh on the estate agent’s sales division this quarter, particularly as we head towards the seasonal lull in activity around Christmas.
‘It is also much more difficult for first-time buyers to get on the housing ladder, with many potential buyers likely to hold off until the mortgage market normalises again.
‘Concerns around a UK recession and the political uncertainty in Westminster may also deter foreign buyers from looking at property in London and elsewhere, which could also weigh on the capital’s largest estate agent. Plus the cost-of-living crisis is also reducing potential homeowners’ budgets when it comes to paying for a mortgage.
‘Arguably all of this may play into the hands of Foxtons’ letting division, as customers look to rent instead of buy given the decreased affordability of mortgages and the squeeze on household incomes from inflation. Optimism towards rental demand is boosting Foxtons’ share price sharply this morning.
‘However even after today’s gains, shares in Foxtons have struggled lately and are still trading down around 20 per cent year-to-date.’
According to data published by the Office for National Statistics published in July, in the year to June, rental prices for the UK, excluding London, increased by 3.6 per cent, up from an increase of 3.4 per cent in May.
London private rental prices increased by 1.7 per cent in the 12 months to June, up from an increase of 1.5 per cent in May, the highest annual rate since February 2017. Despite this, the ONS added, London’s rental price growth in June remained the lowest of any of the English regions.
Earlier this month the ONS said UK average house prices increased by 13.6 per cent over the year to August, down from a 16 per cent rise in the year to July.
The average UK house price was £296,000 in August, which is £36,000 higher than this time last year. Despite having the lowest annual house price growth rate, London’s average house prices remained the most expensive of any region in the UK, with a record average price of £553,000 in August.