UK

Foxtons Warns Of 'Sharp Slowdown' In London Property Market

23/10/2014 10:47 BST | Updated 23/10/2014 11:59 BST
Bloomberg via Getty Images
A Foxtons estate agents sign advertises a residential property as 'Sold' in the Brixton district of London, U.K., on Monday, May 13, 2013. BC Partners Ltd., owner of real estate broker Foxtons Ltd., plans to appoint bankers this month to look at options for the company, Sky News reported, citing people familiar with the matter. Photographer: Simon Dawson/Bloomberg via Getty Images

Foxtons estate agent has warned of a "sharp" slowdown in London's property market as it issued a profit warning, sending its share price falling by more than 15%.

The chain, which has more than 50 branches in the capital, said it had suffered a "sharp and recent slowing of volumes" in London property sales following an exceptionally strong performance in the nine months to June.

It blamed the slowdown on political and economic uncertainty in the UK and Europe, tighter mortgage lending markets and mismatches between the price expectations of buyers and sellers.

Meanwhile, the number of mortgage approvals made to home-buyers was 10% lower in September compared with the same month a year earlier in further signs that the housing market is cooling, banks have reported.

Some 39,271 approvals for house purchase were recorded last month with a total value of £6.4 billion, according to the British Bankers' Association (BBA).

This comes as the latest Office for National Statistics (ONS) figures indicate that average property prices in London leapt by 19.6% year-on-year to hit £514,000.

Property sales commissions at Foxtons were £16.4 million in the quarter to September 30, a fall of 7.8% on a year earlier as a reduction in sales volumes more than offset price increases.

The company now expects that market volumes in the second half of its financial year will be significantly below levels seen a year earlier and that underlying earnings will be down on the £49.6 million achieved a year ago.

This comes as a string of housing market reports have pointed to activity in London cooling down in recent weeks following its period of fierce price growth, as house-hunters look for better affordability outside the capital.

The Royal Institution of Chartered Surveyors (Rics) has reported that London house prices started heading downwards last month for the first time in nearly four years.

Property search website Rightmove has predicted that the pace of house price growth in the South East is likely to pull ahead of London over the next five years as would-be buyers are becoming increasingly "wary and value-conscious" amid expectations that interest rates will start to rise next year, pushing up mortgage costs.

Analysis by Rightmove and Oxford Economics forecasts that the South East will be the region with the highest increase in property values over the next five years, with a 37% increase over the period, ahead of London at 33% and the national average at 30%.

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