Countrywide has warned a logjam in the housing market is eating into estate agents’ profits, sending its shares and those of its rival Foxtons tumbling.
Operating profit in the first nine months of 2015 was down 11% after an expected recovery in the housing market after the general election failed to materialise.
Investors headed for the exit, sending Countrywide shares down more than 11% (down 52.9p to 412.1p) in early trading after the results announcement on Wednesday, while notoriously aggressive rival Foxtons shed more than 8% (down 16.9p to 183.1p).
Countrywide said it handed over the keys to just 48,541 homes in the first nine months of the year, 10% below last year’s figure. It expects the overall volume of house sales in the UK to be 950,000 this year, 5% below last year and far beneath the 20-year average of 1.3m.
“Despite generally encouraging economic conditions, the anticipated post-election recovery in residential transactions failed to materialise in any significant way,” the company said. It also pointed to Land Registry data showing that house market volumes were down 8% in July.
Countrywide blamed a lack of homes coming on to the market, adding that changes to stamp duty introduced by George Osborne had no effect other than to slow the upper end of the market.
It expects operating profit for the year to fall below last year’s record earnings of £121.4m. But the chief executive said she was optimistic of a revival in the housing market during the final quarter of 2015 and moving into next year. “The economic backdrop in the UK coupled with improving consumer confidence point to modest transaction growth in 2016,” Alison Platt said.
Shareholders could expect a return of the group’s special dividend in 2017, she said, adding that this could be partly funded by selling its stake in Zoopla, the property search engine.
Property analysts at the stockbroker Numis Securities warned Countrywide would struggle to hit a target of increasing operating profit to £250m by 2020 without a significant housing market recovery. They said this could spur Countrywide to grow by acquisitions, increasing the risk profile of the company.
The estate agent’s warnings about lack of housing supply echoed the sentiments of Foxtons, which said last monththe property market was taking time to recover.