Photographer: Simon Dawson/Bloomberg

Foxtons Warns London Home Sales Market Will Remain ‘Challenging’

Foxtons Group Plc, the London-focused property broker, said trading will remain “challenging” this year and sales volumes will likely be below 2016 if activity continues at current rates.

The broker dropped as much as 3.6 percent after pretax profit fell 54 percent to 18.8 million pounds ($22.9 million), missing estimates. Analysts had expected about 19.5 million pounds. The shares were largely unchanged at 9:14 a.m. in London trading and have fallen more than 41 percent since the day of the Brexit vote.

“We don’t see any near-term recovery in the investment case,” Peel Hunt analysts including Clyde Lewis wrote in a note to clients. “The group has taken about 6 million pounds of cost out of the business but profits remain highly sensitive to transaction volumes, where there is no sign of any near-term recovery.”

Tax increases and uncertainty over Britain’s vote to leave the European Union have reduced the number of property transactions in the U.K. capital, hurting Foxtons’s revenue as prospective buyers and sellers opt to lease and rent. Greater London home sales fell by more than a quarter last year compared with a year earlier. The broker cut its dividend by 60 percent to 2 pence a share.

“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,”’ Chief Executive Officer Nic Budden said in the statement on Wednesday. “Our lettings business proved more resilient, whilst our mortgage broking business also performed well.”

In prime central London alone the number of properties coming onto the rental market surged 24 percent in the 12 months through February, according to broker Knight Frank LLP. It is too early to assess the impact of the government’s proposed ban on tenants’ fees, Budden said.

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