Foxtons expects falling mortgage rates to boost UK property market during the second half of 2023
- UK house sales declined after the mini-budget sent mortgage rates spiralling
- The group said a typical home purchase is taking over four months to finalise
- Most of Foxtons’ turnover growth last year derived from its lettings business
Estate agency Foxtons has said falling mortgage rates could result in a more robust housing sales market during the latter half of this year.
UK property demand began to fall back from recent highs last September following then-Chancellor Kwasi Kwarteng’s mini-Budget, which sent mortgage rates spiralling and damaged consumer confidence.
This led to a decline in Foxton’s under-offer sales pipeline, with a typical home sale taking over four months to finalise.
Optimistic forecast: Estate agency Foxtons has said falling mortgage rates could result in a more robust housing sales market during the latter half of this year
The group’s sales revenue rose by just 1 per cent to £43.2million last year even as its average selling price increased by £13,000 to £590,000.
But Foxtons said on Tuesday that falling mortgage rates in recent weeks have led to a rise in buyer enquiries and may produce a more advantageous sales market towards the end of 2023.
The London-focused group also expects the UK rental sector to be kept buoyed by high prices resulting from demand outstripping supply levels over the short term.
Most of Foxtons’ turnover growth last year derived from its lettings business, thanks mostly to a 25 per cent jump in revenue per rental transaction offsetting a drop in volume sales.
Private rental prices grew by about a fifth in 2022, according to Foxtons, as rising borrowing costs put many Britons off buying houses and loosening Covid-19 restrictions brought a return of workers and students to the capital.
Rents have also been pushed up by a housebuilding shortage, soaring energy bills, and landlords exiting the rental market.
Foxtons’ revenues were further lifted by the acquisitions of the Douglas & Gordon lettings portfolio, bought in mid-2021, and the Gordon & Co and Stones Residential estate agencies acquired last May.
Combined with the disposal of its loss-making D&G sales division, this helped the company return to a £9.6million profit, having made a £1.3million loss in the previous 12 months.
Investors are set to collect a 0.7p per share final dividend, representing a doubling of the group’s full-year dividend payments on the previous year.
Chief executive Guy Gittins said the firm had made ‘good financial progress,’ adding that it had ‘strong’ underlying foundations from which to achieve additional growth.
After taking over at Foxtons six months ago from rival Chestertons, Gittins launched a now-completed review that he said had already led to enhancements in its front-end operations.
He added: ‘Core operational failings have throttled historical performance and prevented significant unfilled potential from being realised.
‘Operational improvements are being made at pace to rebuild our competitive advantages, including embedding a more confident articulation of our brand, investing in revenue-generating headcount and improving our data platform to fully harness the power of our industry-leading database.’
Foxtons shares were 4.4 per cent up at 43p on Tuesday lunchtime, meaning their value has grown by approximately 42 per cent so far this year.
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