London's runaway property market is finally running out of steam

London’s runaway property market was brought to a halt in 2015, according to Foxtons, by increases in stamp duty, the general election, and soaring prices reaching too high.

London-only estate agent Foxtons says in its 2015 results, released on Tuesday, that activity was “subdued” last year with “challenging underlying market conditions.” Sales volumes across the market fell by 10%, with profits and margins at Foxtons down.

Foxtons CEO Nic Budden says in the release:

In particular, the increase in activity expected by many following the General Election in May 2015 did not arrive and, as a result, 2015 property sales within Greater London were well below levels in 2014. Activity in central London property markets has been especially constrained due to strong recent price growth and stamp duty changes, which have significantly increased the cost of moving home.

At the end of 2014, UK Chancellor George Osborne rejigged the country’s stamp duty system — a tax placed on buyers when they purchase a property — in such a way that anyone buying a house under £925,000 would save money and anyone buying above that threshold would pay more.

This, combined with continued rising prices and the General Election, has clearly taken the wind out of the prime London property market. Foxtons still makes a lot of its revenue from the very top end of the market, central London, and so has been more affected by the changes than regular estate agents.

Still, expansion of its mortgage broking business and outer London buying and letting activity helped Foxtons grow revenues despite the tough market. Foxton’s reported for 2015:

  • Revenue up 4.1% to £143.9 million;
  • Pre-tax profit down 2.6% to £41 million;
  • Adjusted margins down from 32.1% to 30.7%.

As for 2016, Foxtons warns that it’s not sure how “short term political and economic uncertainty caused by the UK referendum on leaving the European Union” will hit activity. Budden also says that the company expects supply to continue to cap activity — there aren’t enough new houses being built to spur sales growth in any meaningful way.

But he says: “We remain confident that our organic expansion strategy together with our strong lettings business will enable us to continue to deliver robust results.”

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