Shares in Foxtons rose 3.42% yesterday off the back of its interim results.
The London agent’s half-year update shows while lettings revenue was up 26%, income from sales was down 19%.
This was attributed to expected lower exchange volumes, reflecting a lower under-offer pipeline at the start of the year.
In sales, Foxtons said it is exchanging deals in its under-offer pipeline, and expects its quarter three exchanges to outpace the levels seen in the first half of the year.
The update said: “The wider sales market continues to remain challenging, primarily driven by higher inflation levels and associated interest rates, which will continue to impact market exchange volumes through the second half of 2023.
“However, should inflation moderate, buyer demand may rebound strongly, underpinned by ongoing demand for London residential property.”
It is for this reason that analysts expect Foxtons’ lettings business to offset any uncertainty in the sales market.
Julie Palmer, partner at Begbies Traynor, said: “The shortage of rental properties means that finding somewhere to live is an ordeal for tenants but it is a dream for London-focused estate agency Foxtons.
“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.”
Greg Poulton, analyst for Singer Capital Markets, said Foxtons’ interims highlight that the operational turnaround is on track.
He said: “This performance stands in stark contrast to previous economic cycles and highlights the resilience of the Group, underpinned by its Lettings business, which now represents 70% of sales.”
Overall, Foxtons’ half-year revenue increased by 9% to £70.9m, with adjusted operating profit up 10% to £6.8m.