Foxtons expects lower mortgage rates to boost UK property market in second half of 2023
- UK home sales dip after mini budget sends mortgage rates skyrocketing
- The group said a typical home purchase takes more than four months to complete.
- Most of Foxtons’ revenue growth last year came from its rental business
Estate agency Foxtons said lower mortgage rates could lead to a more robust home sales market in the second half of this year.
UK property demand has started to decline from recent highs last September following then-Chancellor Kwasi Kwarteng’s mini-budget, which sent mortgage rates soaring and hurt the consumer confidence.
This caused Foxton’s sub-offer sales pipeline to decline, with a typical home sale taking more than four months to complete.
Optimistic forecast: Estate agency Foxtons said lower mortgage rates could lead to a more robust home sales market in the second half of this year
The group’s turnover rose just 1% to £43.2m last year, even as its average selling price rose by £13,000 to £590,000 .
But Foxtons said Tuesday that falling mortgage rates in recent weeks have led to increased buyer demand and could produce a more favorable sales market towards the end of 2023.
The London-based group also expects the UK rental sector to be supported by strong prices resulting from demand exceeding short-term supply levels.
Most of Foxtons’ revenue growth last year came from its rental business, thanks mainly to a 25% increase in revenue per rental transaction offsetting a decline in sales volume.
Private rental prices have risen by around a fifth in 2022, according to Foxtons, as rising borrowing costs have deterred many Britons from buying homes and the easing of Covid-19 restrictions has led to the return of workers and students to the capital.
Rents have also been pushed up by a shortage of housing construction, skyrocketing energy bills and landlords leaving the rental market.
Foxtons’ revenue was further driven by the acquisitions of the Douglas & Gordon rentals portfolio, bought in mid-2021, and the Gordon & Co and Stones Residential estates acquired last May.
Combined with the divestiture of its loss-making D&G sales division, this helped the company return to a profit of £9.6m, after posting a loss of £1.3m in the previous 12 months.
Investors are expected to receive a final dividend of 70p per share, which represents a doubling of the group’s dividend payments on the previous year.
Chief executive Guy Gittins said the company had made “good financial progress”, adding that it had a “solid” underlying foundation from which to achieve further growth.
After taking over from Foxtons six months ago from rival Chestertons, Gittins launched a now-completed review which he said had already led to improvements in his front-end operations.
He added: “Major operational failures have strangled historical performance and prevented the realization of significant untapped potential.
“Operational improvements are being made at pace to rebuild our competitive advantages, including integrating a more confident articulation of our brand, investing in a revenue-driving workforce and enhancing our data platform to fully harness the power of our base. cutting-edge data.”
Shares of Foxtons rose 1.9% to 42p on Tuesday morning, meaning their value is up around 40% so far this year.
