London rent prices surge by 20% but house sales losing steam, Foxtons says
London-focused estate agency Foxtons has cashed in on soaring rental prices, but cautioned over a more challenging year ahead as higher interest rates are set to rein in housing sales.
Foxtons revealed it started the year with fewer homes under offer than the previous year, due to volatility in the housing market caused by Liz Truss’s autumn mini-budget.
Because it takes four months to complete a house sale on average, the effects of reduced buyer activity will be felt throughout the year, the company said.
Nevertheless, Foxtons reported stronger financial results over 2022, with its pre-tax profit doubling to £11.9 million from £5.6 million the prior year.
Its revenues jumped by a 10th to £140 million after seeing particularly strong growth in its lettings business.
The overall outlook for 2023 is expected to be more challenging than 2022, due to the highly uncertain macroeconomic backdrop, including significantly higher interest rates and inflation levels than in prior years impacting the sales market
Guy Gittins, Foxtons chief executive
It comes as London’s rental market has remained tight, with low levels of available homes but high demand, leading to much higher prices and people agreeing to longer tenancies.
Average rental prices surged by a fifth over the year and Foxtons said its average revenue per letting increased by a quarter, to £4,211 from £3,365.
But fewer rental properties led to a 7% decline in the number of transactions during the year.
Meanwhile, the average price of properties sold increased to £590,000 from £577,000 in 2021.
Mortgage rates have started to reduce in recent weeks and buyer activity is picking up, the estate agency said, meaning the sales market could improve in the second half of the year.
Guy Gittins, Foxtons’ chief executive, said: “The overall outlook for 2023 is expected to be more challenging than 2022, due to the highly uncertain macroeconomic backdrop, including significantly higher interest rates and inflation levels than in prior years impacting the sales market.
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“Lettings is expected to remain resilient in 2023, with demand for rental properties expected to continue to outstrip supply over the near term, with rental price growth likely to normalise over the course of 2023.”
Mr Gittins told the BBC’s Today programme on Tuesday that the main issue in London’s rental market is the lack of supply, rather than affordability issues.
He said that people struggling to afford London rents “are going to have to move” out of the capital, or compromise on the property type or location.
