London’s once leading estate agent, Foxtons, profit has plunged by a whopping 64%. Between January – June this year, profits have fallen from £10.5m to £3.8m. As well as, the group revenue dropping by 15% to £58.5m. And new legislation banning letting agent's fees, which was announced following our Make Renting Fair campaign, looks set to impact their profits further.
Foxtons were once famous for their Mini Coopers and stylish, original coffee shop-style outlets. Since 2013, Foxtons has failed to meet the markets expectations on more than one occasion.
Foxtons informed that the property market ‘continues to be weighed down’ by the tax changes. Theresa May’s surprise call for another general election ‘led to a further slowing of transaction levels’ in the second quarter.
However, it wasn’t just Foxtons that took a blow. The UK’s biggest estate agent Countrywide, who own multiple brands, profits fell by 98% too. Countrywide said its pre-tax profits fell to 447,000, in the same timeframe, as the number of homes fell by 20%. Countrywide are currently trying to boost their digital service to compete with online-only estate agents, like eMoov.
Foxtons stated that London were more affected in comparison to the rest of the UK. Housing prices were increasing by 10% a year but since the Brexit vote, that took place in June 2016, the UK’s housing market has dramatically slowed down.
The UK’s third-largest housebuilder, Taylor Wimpey, said that they think the risk of material effect on the market, since the EU referendum has reduced considerably in the short-term.
Foxtons lowered their costs by £3.7m in the first quarter. But, although Foxtons warned that the rest of the year may be a struggle, they stressed that London will always be a ‘highly attractive property market for sales and lettings.’
Another area of the firm that could potentially be a major setback – the government banning letting agent fees. Last month, the Queen proposed a ban on charging tenant letting fees in England. Letting fees are to cover the cost of managing viewings, verifying references and drawing up contracts, have been a major money making contributing factor. Actions to enforce the ban would allow tenants to recover fees which have been illegally charged. The average amount paid in fees is £223. The Chancellor, Phillip Hammond, said that 4.3m households pay such fees every year. Lettings currently represent 55% of Foxtons’ income.
But lettings currently represent 55% of Foxton's income, and revenue from lettings fell from 2% to £32.1m. Letting fees are to cover the cost of managing viewings, verifying references and drawing up contracts, have been a major money making contributing factor. Actions to enforce the ban would allow tenants to recover fees which have been illegally charged.
With fees previously representing a significant revenue stream for Foxtons, this could have further impact on their profit. ‘As the lettings market grows, it is becoming more complex too, with significant new regulation, legislation and tax changes introduced in recent years,’ the company said in a statement.
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This article originally appeared on The Debrief.