Foxtons’ sales revenue in Q3 has fallen as Budget uncertainty hit London’s buyers, with the London estate agency relying on its lettings operation to offset the weaker sales market, according to Guy Gittins (pictured), Chief Executive at Foxtons.

Its latest trading update reveals that sales revenue has dropped 7% to £12.5 million in Q3 as buyers have adopted a ‘wait and see’ attitude ahead of the delayed Autumn Budget. Buyer activity was also hit by deals being pulled forward to Q1 to beat the Stamp Duty deadline and limited interest rate cuts.

Macroeconomic uncertainty

Gittins says: “Macroeconomic uncertainty and speculation surrounding the delayed Autumn Budget have resulted in a subdued sales market as some buyers adopt a ‘wait and see’ attitude to purchases. There remains significant pent-up demand in the London volume market, and we believe market conditions will improve once there is better clarity following the Budget, providing a more positive backdrop as we execute against our growth strategy.”

The drop in sales has meant lettings have become even more critical to the business, with non-cyclical and recurring revenues now accounting for 71% of total group revenue in the quarter.

We have delivered another quarter of growth driven by our strategic focus on Lettings and its recurring revenues, which helped offset a softer Sales environment.”

Gittins adds: “We have delivered another quarter of growth driven by our strategic focus on Lettings and its recurring revenues, which helped offset a softer Sales environment.”

Lettings revenue has grown 5% to £33.4 million, driven by better portfolio retention and more new deals, plus rental price growth. Recent acquisitions in Reading and Watford have added another £1.5 million.

Financial Services have also picked up some of the slack, with revenue up 37% to £3.1 million as refinancing activity has increased, with new mortgage business holding steady despite the weaker sales market.

Revenue up

Overall, in Q3 revenue was up by 3% to £49 million, with year-to-date revenue up 7% at £135.1 million. The year-to-date sales figure was also up by 12% at £39.4 million, thanks to a bumper Q1 performance ahead of the March Stamp Duty deadline.

Moving forward, Foxtons is banking on lettings to carry it through. The estate agency says it expects lettings to trade in line with year-to-date trends for the rest of the year, but warns sales are likely to remain subdued, particularly in the run-up to the Budget.

Full year adjusted operating profit is now expected to be between £21.5 million and £23.2 million – the wide range reflecting uncertainty over whether sales under offer will actually convert.

You can read the full report here.