It looked like bad news for housing last week. There are mixed reports over whether Rishi Sunak will extend the stamp duty holiday — and the uncertainty is not helping.
So how will Foxtons, the London-listed estate agent focused exclusively on the capital, grapple with the change? After floating at 230p a share in 2013, at the height of the post-crisis property boom, Foxtons has rarely failed to disappoint, but its sales teams have failed to fend off increased competition from low-cost online rivals or navigate the unstable London property market. The shares have bobbed around and were trading at 95p before the pandemic came calling.
The London market has slowed and potential home buyers can now choose from rivals such as Purplebricks, which charges a fixed £1,499 fee, compared with Foxtons’ 2.5% plus VAT. Countrywide has also faltered. After floating in the same year as Foxtons, it has been a disaster for shareholders — and this month agreed a takeover deal with Connells for a fraction of its listing price.
However, after grinding to a halt at the start of the pandemic, the market experienced an autumn lift — partly due to a flurry of sales in London as families fled in search of a country bolthole. Nationally, Sunak’s stamp duty holiday on properties under £500,000 — which cost taxpayers £3.3bn — pepped up the market. That cut — which meant no duty was paid on the first £500,000 of a house purchase on their main residence — saves buyers up to £15,000.
For Foxtons, the effect of its removal will be mixed. While it will drag on sales, as will rising unemployment, it is unlikely to be hurt as much as rivals — most of its homes are above £600,000 and two-thirds of its revenues come from lettings, not sales.
The pandemic led to reduced demand for short-term lets such as Airbnb, which has pushed landlords towards agents such as Foxtons. It hopes to turn these into long-term clients — which would provide a more enduring benefit. At the same time, it plans to use some of the £22m raised in a share placing in April to snap up smaller rivals in the rental market. It has already spent £4.6m acquiring lettings books and businesses.
The shares have been on a strong run in the past few months, up 82% since a trading update in October. They closed on Friday at 58.8p, after jumping 16.6% since the start of the year.
A post-Covid boom — and a greater focus on renting in London — could provide a long-term boost to Foxtons, but short-term competition and pressure on sales is likely for some time. Avoid.
