Share prices in London real estate agents took a beating as U.K. voters’ decision to leave the European Union triggered concerns about falling residential house prices. Eyes will be on whether the companies have measures to counter the immediate impact on their businesses.
Foxtons (FXTGY) saw its shares plunge 22% in London morning trading. Today, the London estate agent Foxtons issued a warning on its full-2016 earnings, saying it expects group revenue and adjusted earnings to fall “significantly lower” than the previous year. The company attributed the downturn to prolonged and increased uncertainty due to the referendum, which will “now likely continue for at least the remained of the year. It now forecasts first-half 2016 adjusted earnings “in the region of 20%.”
Still, Foxtons CEO Nic Budden expressed confidence about the London market and the measure he has in place to counter uncertainty.
“Looking further ahead, we remain confident of the attractiveness of London property sales markets and our strategy to focus on the outer London mid-market segment,” Budden said. “Furthermore, our strong lettings business provides strong downside protection.”
In the quarter ended March 31, Foxtons saw group revenue rise 16.2% to £38.4 million ($50.7 million), driven by a 28.5% increase in property sales commissions before the introduction of the property tax surcharge in April on buy-to-rent investments and second homes. The company has lost about 62% of its value since listing its shares on the London Stock Exchange in September 2013.
All eyes are on how a Brexit will affect the housing prices in the U.K., which have continued to increase at an annual pace of more than 9% for eight months running. According to the Halifax House Price Index, house prices in the three months to May 2016 rose 9.2% year-on-year on a seasonally adjusted basis, with the average price at £213,472. Home-seekers have reportedly pulled out of purchases following the “leave” vote on concern about house prices and job security.