LONDON — Estate agent Foxtons on Wednesday blamed changes in stamp duty taxes and last year’s EU referendum for killing sales in London’s property market, as the company announced a 54% collapse in full-year profits.
London-focused estate agent Foxtons on Wednesday set out a dismal set of 2016 results, with revenue down 11% to £132.7 million and pre-tax profit down a huge 54% to £18.8 million. Sales of properties in greater London fell by 26% in 2016 compared to 2015, Foxtons says.
CEO Nic Budden blamed former Chancellor George Osborne’s decision to hike stamp duty tax for buy-to-let landlords and those looking to buy a second home. The changes came into force last April and led to a slump in sales.
Budden also blamed last June’s referendum on Britain’s membership of the European Union. Victory for Brexit hit confidence in the London property market and “is likely to lead to a prolonged period of further economic uncertainty,” Budden says.
As a result, Foxtons CEO also warned that sales are likely to slump further in 2017. He said:
“Last year’s London property market was severely impacted by an unprecedented sequence of events with changes to stamp duty and the EU referendum vote leading to a substantial reduction in property sales transactions, especially in Central London.
“We were not immune to the decline in volumes, although our lettings business proved more resilient, whilst our mortgage broking business also performed well. We expect trading conditions to remain challenging throughout 2017. Should current sales activity continue through the remainder of this year, it is likely that 2017 sales volumes will be below last year.”
Foxton’s 2016 results were well flagged in earlier market updates, but Budden’s gloomy forecasts have sent Foxton shares down just over 1.5% on Wednesday morning:
Despite the short-term pain for Foxtons, Budden says that there are still good market dynamics that should help it flourish in the longterm:
“Significant pent-up demand for housing is driven by the fact that population has increased by c1.2m from 2005 to 2016 with only circa 200,000 new homes built. These fundamental demand and supply dynamics mean that transactions will increase once a greater level of economic certainty returns to the market.”