Mixed interim results for Winkworth as market starts to stall
A shift in market sentiment may affect sales volumes going into 2023 and lead to a more careful pricing environment.
Winkworth, London’s upmarket estate agency franchisor, reported mixed interim results this morning, albeit in line with expectations, with revenues down by 18% to £4.28 million.
Network revenues were down by 24% to £27.7 million and while sales revenues were down by 39% to £15 million network lettings revenues were up by 8% to £12.7 million. Profit before taxation at the group was down by 46% to £1.07 million.
CAUTION
Simon Agace, Winkworth non-executive chairman, expressed concern that buyers in some areas are becoming more cautious of excessive valuations and becoming wary of both rising inflation and interest rates which could lead to moving delays.
He says: “This shift in market sentiment may affect sales volumes going into 2023 and lead to a more careful pricing environment, where the most important consideration becomes choosing a buyer at a price that will ensure completion of the transaction.”
I am wary of the outcome of the current debate on the relationship between landlords and tenants.”
Despite wider concerns the lettings and management business has continued to grow but clouds are starting to gather.
Simon Agace adds: “Over the course of my career, I have experienced the Rent Acts pre-1986 and I am, therefore, personally wary of the outcome of the current debate on the relationship between landlords and tenants.
“It is interesting to note that the Irish government has recently suggested introducing incentives to encourage landlords to grant longer leases to tenants in return for tax incentives, whereas in the UK, July 2022’s White Paper considers scrapping fixed-term tenancy agreements altogether.
This uncertainty may cause some landlords in the UK to reduce their portfolios or exit the business.”
“While the build to rent sector may replace some of the demand at the mid to lower end of the market, it will not replace the higher demand for the individual and varied supply of rental properties generated by the private rental sector. At this point of the cycle, we suspect that Winkworth’s sales business will grow faster than rentals.”
OVERHANG
Dominic Agace (main picture), Winkworth chief executive, adds: “Our first half results are not flattered by the comparison with the extraordinarily strong first half of 2021.
“We enter the second half with an overhang of unfulfilled business, the confidence that our franchisees are adept at adjusting rapidly to changing markets, and a business model that is designed to perform throughout the property cycle.
“We do expect the increased cost of borrowing to have an impact on property, softening demand and slowing the price increases seen of late. With strong levels of employment, however, as well as the significant pent-up demand to relocate post-Covid, and as the cost of renting increases, we expect sales demand to remain strong for the remainder of the year, with prices in positive territory.
“Beyond that, much will depend on the trajectory of interest rates and macro-economic factors.”