Lettings division proves its worth in agency's big turnaround

A strong lettings division has allowed Foxtons to record strong growth in its latest trading statement, despite the challenging sales market.

The London-focused agency has told shareholders that it expects the sales market to remain challenging amid high mortgage rates and inflation - however, a 26 per cent leap in its lettings revenue has allowed the group as a whole to post a 10 per cent jump in half-year profits. 

Chief executive Guy Gittins says: “Our continued focus on growing non-cyclical and recurring revenues is working and has enabled us to deliver strong revenue and profit growth despite a challenging sales market and investing in recruiting more fee earners.

“In the first half of the year we cemented our position as London’s largest Lettings and Sales estate agency brand. We not only had the largest market share of instruction volumes in London, but we also grew instruction market share quicker than any of our competitors as recently implemented operational upgrades yielded significant gains. 

“Our Lettings business continued its growth trajectory, with double digit organic growth delivered in a competitive market. In Sales, although revenues were down due to the September 2022 mini-budget, which impacted the under-offer pipeline at the start of the year, we significantly grew market share, rebuilt the pipeline at the fastest rate in the last 5 years and agreed a similar level of new sales as last year, despite challenging market conditions.

“Looking ahead, despite the uncertainty in the sales market, our resilient and growing Lettings business combined with continuing Sales market share gains and a strengthened sales culture, means we are well positioned for the rest of the year.”

In response Simon Jones, chief executive of Investing Reviews, says: "These results underline the value of having a strong lettings arm to mitigate the impact of a slower sales market. The sales market is under a huge amount of pressure as rates continue to rise, but if you have a strong lettings proposition, you can ride things out. 

“The growth in refinance volumes compared to the first half of last year shows how homeowners are proactively trying to hedge themselves against future rate rises. Given the sheer level of uncertainty in the market, Foxtons has fared relatively well."

And Julie Palmer, partner at Begbies Traynor, adds: “With more than 27,000 rental properties on its books, Foxtons has shrugged off rising interest rates slowing the sales market, with the lettings business more than making up the difference.

“That’s something unlikely to change in the near term with the company noting that the imbalance between supply and demand of rental properties is at the highest level the agency has ever seen. The difficult market for home sales and rising costs means builders are cutting back on construction rates and the planning system remains as tied up in red tape as ever, so Foxtons’ future looks bright for years to come.

“Chief executive Guy Gittins was installed in the autumn with a remit to turn the business around and his focus on stable revenues – such as the rental market – is paying off. It means that Foxtons is insulated from a property sales market which is likely to be subdued for some time as buyers get used to mortgages at interest rates that were unimaginable a few years ago.”