Upmarket, London-focused estate agent Foxtons is struggling to adjust to the growing slowdown in the capital's property market and expects a "challenging" 2017.
The agency — which has faced criticism in the past for embodying many of the issues young Londoners face when trying to get on the property ladder — released a trading update for 2016 on Wednesday, and it did not make for pleasant reading.
Foxtons reported that it expects full-year earnings of around £25 million ($30.2 million), just over half of the £46 million booked in 2015. Total revenues were down from £150 million in 2015, to £133 million in 2016, while revenues for Q4 were 25% down from Q4 2015.
"Looking ahead, we expect trading conditions to remain challenging in 2017. Should current levels of sales activity continue in the short term, it is likely that 2017 volumes will be below those in 2016," chief executive Nic Budden said in the update.
Foxtons' shares are down by around 4% at 12.10 p.m. GMT, having recovered from a 12% early on Wednesday morning. Here is the chart:
Regardless of its detractors, Foxtons has been a massive success story in the crowded real estate agency market in recent years, and its new struggles are indicative of bigger problems for estate agents.
In London in particular, the crazy boom in property prices and a perceived lack of supply has fuelled strong performances from estate agents. However now the capital's market is starting to slow — forecasts abound that London's property boom may be grinding to a halt, amid slowing demand and political uncertainty brought on by the Brexit vote — times will start to get tough.
New research from consultancy Begbies Traynor sent to Business Insider reveals the scale of the issue. "25,669 UK real estate firms were suffering from financial distress at the end of November 2016, up 7% from 23,967 companies at the same stage last year," it says.
"Worryingly, estate agents in London saw the sharpest increase in distress over the period, rising 22% year-on-year, with 1,066 firms ending November in a weakened financial state (Nov 2015: 875 businesses), giving credence to widespread concerns around the stability of the Capital’s fragile housing market."
Several factors are at play in hitting the country's estate agents: the government's stamp duty shake-up, a clampdown on letting fees, and the rise of online estate agents like Purplebricks.
That's on top of the impacts that the wider slowdown in the capital's market will have. The UK's vote to leave the European Union in June is weighing particularly heavily on London's housing market. Market analysts Hometrack say that concerns over the financial impact of Brexit will "weigh on the housing market sentiment, particularly in southern England."
London property has now got so expensive that people are increasingly moving out of the capital to find a cheaper place to live. As Business Insider's Thomas Colson noted in December:
"Research from estate agents Hamptons found that Housebuyers in the capital are fleeing at the fastest rate for 10 years, with 77,500 Londoners buying houses outside the city in 2016 — 22% more than in 2015. That demonstrates an increased willingness to purchase property in London's "commuter belt," which may be contributing to a slowdown in demand in central London."
A slowing market in London may be good for buyers and renters alike, but for the capital's estate agents, there are troubling times ahead.