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Bloomberg
Britain’s largest property brokers are cutting jobs, closing branches and raising capital even as homes sell for record amounts. While some companies have blamed Brexit and tax hi-kes for a drop in transactions, high values have put off many other buyers.
Demand for housing dropped to 6-month low in Feb, according to the Royal Institution of Chartered Surveyors. The widening gap between home values and wages means brokers including Countrywide Plc and Foxtons Group Plc are closing fewer deals while being undercut on fees by online companies.
“It’s handy to blame this downturn on Brexit and property tax changes, but prices were overstretched relative to incomes prior to these changes,†JPMorgan Chase & Co. analyst Tim Leckie said by phone.
UK property values have been rising for five years after the government stoked demand by introducing programs such as Help to Buy. Prices for first-time buyers reached 5.3 times average earnings in the final quarter of 2016, just short of the 5.4 times ratio at the market’s peak in 2007, according to Nationwide Building Society. In London, the ratio was 10.1 times earnings at the end of last year, down from 10.3 in the third quarter — the highest since at least 1983.
Countrywide, the country’s largest broker, shuttered 200 branches last year, while LSL Property Services Plc cut 21 outlets in the six months through December. The real estate industry as a whole lost 6,000 jobs in the past three quarters, according to Office for National Statistics data published last month.
“We can’t see a catalyst for the market improving,†Countrywide Chief Executive Officer Alison Platt said on a March 9 call with reporters. The London-based company raised about 38 million pounds ($47 million) in a share sale earlier this month, which it plans to use to cut debt and improve its digital operation.
Foxtons, a London-focused broker, has fallen almost 44 percent in London trading since Britain voted on June 23 to leave the European Union. Pretax profit fell 54 percent to 18.8 million pounds last year as property sales dropped by more than a quarter, the company said.
In January, brokerage outlets had an average of 425 prospective buyers on their books and 38 properties for sale, according to a survey of members published by NAEA Propertymark, a lobby group for estate agents. On average, each branch completed eight deals during the month, unchanged from a year earlier, the report showed.
“The main reason estate agents are having a hard time is due to a shortage of stock to sell and we suspect that with respect to the stock they do have, the sellers price expectations are unrealistic,†Anthony Codling, an analyst at Jefferies International, said by phone.
To be sure, successive tax hikes have hurt demand for the most expensive homes.
There are now signs that less glamorous parts of the capital, which are less susceptible to the tax changes, are starting to weaken. “I feel property in Putney is overvalued and likely to drop in the next few years,†Douglas Olizar, a broker at JC Francis & Partners, wrote in the RICS report. The company is based in the west London district.