Foxtons investors spooked by house market warning

 

The City planted a “for sale” sign on shares in London’s biggest estate agent, Foxtons, yesterday, as the company warned of a slowing housing market for the rest of the year.

Foxtons, renowned for its fleet of Minis and aggressive sales tactics, blamed measures to control mortgage lending announced by the Bank of England and growing speculation over interest rate rises “for an impact on short-term demand” among would-be buyers.

The announcement – coming exactly a year after Foxtons first confirmed its intention to float – spooked shareholders, sending the company’s stock down more than 10 per cent, or 30.3p, to 264p.

Even a £12.8m giveaway in the form of a special dividend and interim dividend, as well as a 57 per cent rise in first-half, pre-tax profits to £23.1m failed to placate investors.

The company acted on 2,919 sales in the first half, up 20 per cent on last year.

Chief executive Nic Budden said: “Looking ahead to the second half, we expect the growth in transaction volumes to slow from the rapid rate seen in the first half.”

New Bank of England rules only allow 15 per cent of new mortgages to be more than  4.5 times a borrower’s income, while lenders have tightened up affordability checks.

The UK’s economic recovery, meanwhile – which prompted two votes for an interest rate rise from the Bank of England’s Monetary Policy Committee this month – has fuelled expectations of a first interest rate rise since July 2007 early next year.

According to Rightmove’s latest survey, asking prices in London fell for a third month in a row, dropping by nearly 6 per cent between July and August in a much bigger than average fall for a typically quiet time of year. 

New data from National Association of Estate Agents also showed that about  two thirds of houses sold in July went for less than the asking price.

Despite yesterday’s fall, Foxton’s shares are still above the 230p offer price on a share flotation which made paper fortunes for a host of the estate agent’s staff, including its former chief executive, Michael Brown, who stepped down from the company earlier this year. However, they are 30 per cent down on their recent March peak close  to 400p.

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