Foxtons hits out at Renters’ Rights Act as profit halves
Foxtons’ profit slipped as the London estate agency hits out at the Renters’ Rights Act, blaming the new tenant powers for causing a surge in renters cancelling their tenancies.
The London-listed firm said the new law meant a higher number of tenants cancelled their rental agreements in May and June, meaning the estate agency lost out on £3m in expected rental income. This pushed pre-tax profit at Foxtons down by 57 per cent to £4.4m in the year to June.
“A small proportion of tenants exercised the additional flexibility afforded by the legislation, leading to higher early termination levels in May and June,” the board said to shareholders.
“The impact was greatest immediately following implementation of the legislation in May, as some tenants took the opportunity to serve early notice.”
Consumer confidence slows lettings
The Renters’ Rights Act, which was championed by recently returned housing secretary Angela Rayner, outlawed no-fault evictions and ended fixed-term tenancies.
Despite the initial hit in rental income, Foxtons said it sees “significant medium-term opportunities” in the new legislation, once the initial “volatility” subsides.
Foxtons said the law means landlords have more demand for professional advice on how to comply with their new obligations.
The estate agency saw a 13 per cent drop in sales in the six months to June, which it blamed on uncertainty over Prime Minsiter Andy Burnham’s property tax regime and the higher-than-expected interest rates caused by the Iran war.
“The London sales market remains challenging, with buyer activity continuing to be held back by weak consumer confidence and higher interest rates,” the group said.
Property market ‘deteriorates’
House prices in the capital have been falling so far this year, despite wider price growth across the country. Property experts have blamed stamp duty, which weighs heavier on buyers in London and the south because of the areas’ higher property values.
Stockbroker Panmure Liberum said the UK’s lettings and sales market has “deteriorated” since the last time Foxton’s updated the market, in April.
The property market in London and the south east has been particularly vulnerable to “ongoing political uncertainty, both in the UK and the Middle East,” analysts said. But Panmure said this volatility and the market changes caused by the Renters Rights Act are “temporary” headwinds, leaving Foxtons “well placed to benefit” from the new legislation in the medium term.
Earlier this year, Foxtons hit out at the “strain” being caused by “government-driven” costs like national insurance and wage hikes, which it said are harming its bottom line.
Shares in Foxtons rose by two per cent to 40p in early trading.