Estate agent sees no pickup in housing market until after May election, as annual profits at chain fall
Foxtons has made up to 60 of its agents redundant after a sudden
downturn in the London property market that caused the estate agent’s
annual profit to fall.
The London-based agent hired extra staff early last year expecting
the frenzied property market to continue. But an abrupt slowdown in the
second half prompted it to cut between 50 and 60 jobs – representing up
to 7% of its workforce – towards the end of the year.
Foxtons’ chief executive, Nic Budden, told industry analysts: “We saw
very significant activity in the market during the first half of 2014.
We had already used up excess capacity in the business in 2013. We began
to recruit for what we thought was a longer term uplift and as the
downturn came we were a little bit overstaffed and we reduced that
overstaffing.”
The job losses may not draw that much sympathy from buyers and
sellers of houses in London. Foxtons’ sharp-suited agents are known for
their aggressive sales tactics, high commissions and for driving round
in liveried Minis.
Foxtons employees are encouraged to live on their wits and have
little security from the outset. When a new agent is hired, they are
given the use of a boldly painted Foxtons Mini and can choose to earn a
£10,000 salary – less than the minimum wage – plus 10% commission or a
£17,500 salary plus 5% commission.
The group’s earnings before interest, tax, debt and exceptional items
fell by 6.9% to £46.2m in the year ending 31 December. The figure,
Foxtons’ preferred measure, was roughly in line with analysts’ average
forecasts. Pre-tax profit rose 8.2% to £42.1m.
Foxtons blamed much of the market slowdown on wariness among buyers and sellers created by the approaching general election.
Budden said: “We see the sales market remaining somewhat constrained
until at least after the general election and even then we will need
some certainty and clarity in the market before we can predict with any
level of certainty where volumes are likely to move in the market.”
Foxtons is warier about prospects for the property market this year
than its rival, Countrywide, which said late last month it expected some
sluggishness until the election. Labour has proposed a mansion tax
and there is general pressure to find new ways to tax property because
rich people cannot move their houses to avoid the taxman.
With the polls tight and another coalition government a possibility,
Foxtons thinks it may take longer for buyers and sellers to feel
confident about government policy. Budden warned that even an immediate
boost to the market following May’s election would take until the final
quarter of the year to turn into revenue.
Business at Foxtons boomed after it floated on the stock market in
2013 as the property market took off after years in the doldrums. But the company warned in October that annual earnings would be well below forecasts of £57m as the London market slowed down.
Foxtons listed its shares at 230p in September 2013 and they jumped
to 399p by the end of February 2014 as activity in the London housing
market became feverish. They have roughly halved since then and were
down 2% at 202.75p in late morning trading on Wednesday.
One of Foxtons’ tactics is to charge no commission when it opens a
new branch to win business from established agents. Budden said it sold
500 houses for zero commission last year at a cost of about £5m and that
sometimes new branches were taking sales from nearby Foxtons offices.
“We may look to attenuate it in bits and pieces” in those circumstances but the policy will remain broadly intact, he said.
