High rental prices help Foxtons offset slower UK home sales

London’s rental housing market is expected to remain tight with high prices and a limited supply of properties to let, according to estate agents Foxtons.

The London-focused agent reported a boost to revenues and profits from rising rents in the UK capital, and predicted little change in demand for rental properties. The agent said year-on-year price growth was likely to moderate by the end of the year.

“Demand for rental properties [is] expected to continue to outstrip supply over the near term, with rental price growth likely to normalise over the course of 2023,” said chief executive Guy Gittins.

The company projected, however, that rents in London would rise another 5 per cent this year. “The supply-demand imbalance that we have currently is not healthy,” said Gittins, who blamed policy changes that have increased the taxes paid by private landlords for hurting rental supply. “The situation is only getting worse.”

Foxtons raised its profit targets last autumn, citing the surging rental market in the UK capital as workers flocked back to the city following the worst of the Covid-19 pandemic and landlords raised rents to cover rising mortgage payments.

Average rental prices increased 20 per cent last year, Foxtons said, while the number of properties it let fell 7 per cent. Robust letting offset slower growth in home sales, helping Foxtons increase revenues 11 per cent to £140.3mn in 2022. Pre-tax profits at the company more than doubled from £5.6mn to £11.9mn. 

Revenue from lettings made up 62 per cent of Foxtons’ total income and increased 17 per cent last year, while takings from house sales rose just 1 per cent.

The company said the effects of last year’s UK “mini” Budget, which prompted chaos in the mortgage market and a sharp rise in borrowing costs, was likely to be felt throughout the year “due to the time to complete a sales transaction”. 

However, Gittins said he expected a pick-up in house sales in the second half of the year. “I’m quite optimistic having already seen a quite strong uplift in the applicant numbers and viewing numbers.”

The company declared its total dividend for last year would be 0.9p per share, double that of the year before.