Foxtons’ profits climb on higher rents as buyers retreat

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Buoyant lettings activity in the UK capital’s tight rental market boosted earnings at London-based estate agency Foxtons, offsetting a slowdown in house sales in the first half of the year.

Foxtons posted pre-tax profits of £6.1mn in the six months to the end of June, up from £4.3mn a year earlier. Lettings revenue rose 26 per cent in the same period, offsetting a 19 per cent drop in sales revenue caused by higher mortgage costs.

The agency, which has more than 27,000 tenancies, said on Thursday it expected “little change” to the “supply and demand imbalance” that had driven up rent in London, but expected the pace of rent rises to cool in the second half of the year.

Intense competition for a reduced pool of London homes has accelerated as interest rates have risen, while soaring borrowing costs have hit demand from buyers and sellers.

“The continued growth in the imbalance between supply and demand is at the highest levels we have ever seen,” Foxtons said. “This continues to drive rents and is making it more difficult for renters to find affordable accommodation in London.”

Foxtons has in the last year sought to increase its activity in the rental market, which it sees as more resilient to economic downturns than sales. Lettings made up 70 per cent of the estate agent’s revenue in the first half of the year, compared with 61 per cent in 2022.

“Our continued focus on growing non-cyclical and recurring revenues is working and has enabled us to deliver strong revenue and profit growth despite a challenging sales market,” said chief executive Guy Gittins.

The group said it had received fewer buyer inquiries in July because of the rising cost of borrowing. Mortgage rates, which had been climbing in recent months, soared after the Bank of England raised its benchmark interest rate to 5 per cent in June.

Foxtons, which was founded in the 1980s in London, said mortgage refinancing volumes jumped 29 per cent in the first half and it expected the trend to continue throughout the year. However, overall revenue at its financial services business fell 12 per cent as customers took smaller loans and made fewer new purchases.

Foxtons said that although it expected an increase in house sales in the third quarter, inflation and high borrowing costs would continue to hit transactions throughout the year.

The group’s board announced a half-year dividend of 0.2p a share. Shares in the agency rose 3 per cent in early trading on Thursday.