This article is more than 3 years old

This article is more than 3 years old

Foxtons has unveiled a sharp drop in profits and has warned that housing sales would decline in the year ahead if demand for properties fails to pick up.

The London estate agent’s trading update added to fears over the state of the capital’s housing market, and traders were quick to offload shares in the company. Foxtons’ shares plummeted 12% to 87p after the update was released, ending the day down 3.3% at 95.75p.

Those shares were valued at 230p when the business floated in 2013 and hit 373p in early 2014.

Prices in central London’s top postcodes, where Foxtons mainly operates, have fallen sharply in recent months. In order to reduce its reliance on central London, the company has been pushing into the capital’s outer areas such as Peckham and Vauxhall.

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Nic Budden, its chief executive, said 2016 had been a challenging year, with revenues falling to £133m from £150m in 2015 after a significant drop in sales. Underlying earnings for the full year are expected to be £25m, down from £46m a year earlier.

“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,” he said.

A company spokesman said Foxtons had been hit by uncertainty caused by the Brexit vote, affecting foreign buyers in particular; the impact of last April’s 3% stamp duty rise on the top end of the market; and general affordability issues, with rising house prices far outstripping wage growth in recent years.

Figures published last month by mortgage lender Nationwide showed house prices in London last year grew at a slower rate than the national average for the first time in eight years.

Taylor Wimpey, one of Britain’s biggest housebuilders, said on Wednesday that lower selling prices in central London had also affected its performance, sending its shares 2.5% lower to 170.6p.

Budden said Foxtons was resilient against market cycles and had a strong balance sheet with no debt. “As the most recognised residential brand in London, we are uniquely positioned to manage through the market uncertainties and take advantage of any change in conditions,” he added.

The company’s lettings business performed better than sales in the fourth quarter, with revenue unchanged at about £13m as the number of new tenants fell but existing tenants renewed their contracts. But analysts at Peel Hunt said the government’s proposed ban on letting fees could lead to further pressure on profits.

Anthony Codling, analyst at the investment bank Jefferies, said 2017 would be a tougher year for Foxtons than 2016.

“Foxtons have said what most of London was already thinking, the housing sales market has slowed since a certain EU referendum, macroeconomic uncertainty has led to a fall in housing transactions and renters in sympathy seem to be staying put for longer. We are reducing our [earnings] estimates today, but Foxtons remains a fighter and its focus on cash should be rewarded.”

Foxtons, which opened its first branch in Notting Hill Gate, west London, in 1981, now has 65 branches. It has scaled back new office openings this year, but is planning to open two more in outer London – Wembley and Wood Green – by the end of March.

The company will publish its 2016 results on 8 March.