The slowdown in London’s housing market has been well documented over recent months. Prime London sales have been reported as going through on an average of 10% below the asking price and sales numbers have generally slowed since the Brexit vote as buyers adopt a cautious ‘wait and see’ approach. While the wider London area, after several years of runaway price increases, is expected to see minor to stagnant property price increases over the coming twelve months, the malaise has generally been reported to have had by far the greatest impact on the most expensive neighbourhoods.
However, London-centric real estate agency Foxtons explained a poor set of annual results to shareholders today with an assessment that home sales in the capital have dropped to ‘near historic lows’. The company’s pre-tax profits for 2017 were down 65%, almost two thirds, on those of a year earlier. Revenue generated from the brokerage of home sales was down 23%.
The estate agent’s statement suggests that the wider London market, and not just exclusive areas, have been more heavily impacted than previously thought. Factors behind the slow down were highlighted as a 2016 change to stamp duty as well as changes to buy to let tax breaks that have made investment properties in the capital, which account for a significant percentage of buyers, losing appeal. Declining consumer confidence and uncertainty following Brexit and last May’s general election were also mentioned.
While it could be surmised that Foxtons is exaggerating the slump in London home sales to excuse a disappointing set of results, peer Countrywide, the UK’s largest listed estate agent, also issued a profit warning last month. Countrywide’s business is less London-centric than that of Foxton’s, though the capital still accounts for a very large portion of revenues and profits. It looks as though things are unlikely to improve this year. Anthony Coding, a property and construction sector analyst at investment bank Jefferies commented after the results that “early indicators are that so far 2018 has been tougher than 2017.”
Nonetheless, it is not all doom and gloom. A recent report by another estate agent, Frank Knight, highlighted several London ‘hotspots’ it expects will see strong prices rises over the next 3 years. Most are as yet underdeveloped regions that have regeneration projects in place and neighbor areas that have blossomed over the past decade. Others are on the new Crossrail line or have proposed stations on the subsequent Crossrail 2. Securing investment properties in these areas at attractive prices over the next couple of years may become an even more attractive proposition if London has a blip.
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