Foxtons warns of a cooling housing market

Estate agent Foxtons boosted sales and profits in the first six months of the year, but warned that regulation will cool the housing market in the second half.

Foxtons said pre-tax profits lifted 57.1 per cent to £23.1m in the half year to June 30 as a buoyant housing market saw property transactions jump 30 per cent in London in the first four months of the year. Sales rose 16.2 per cent to £72.8m.

But the firm, which has 49 branches in London, said the introduction of market affordability tests, enhanced lending rules by the Bank of England, and the prospect of an interest rate hike will slow the market in the rest of 2014.

Hide Ad
Hide Ad

Foxtons chief executive Nic Budden said: “The combination of higher sales and mortgage volumes, together with the efficiency of our operating model has led to a significant increase in revenue and profits. Looking ahead to the second half, we expect the growth in transaction volumes to slow from the rapid rate seen in the first half as the policy initiatives introduced in 2014 aimed at controlling mortgage lending, together with the expectation of increases in interest rates, are now having an impact on short-term demand among buyers.”

Foxtons shares fell almost 6 per cent following the warning.

The Mortgage Market Review (MMR) introduced strict afford-ability tests on borrowers in April to avoid a housing bubble.

This was followed by Bank of England measures in June which ruled that lenders must ensure no more than 15 per cent of new mortgages are given to people borrowing more than 4.5 times their income.

Hide Ad
Hide Ad

Lenders will also have to stress test borrowers’ ability to repay loans if their mortgage rate were 3 per cent higher than the rate at the time the loan was approved.

Foxtons said market mortgage approvals rose 22 per cent in the first six months of the year.