Shares in the UK’s biggest chain of estate agents slumped by more than 12% after the company reported a big drop in London property transactions and warned that Brexit was undermining buyers’ confidence.
Countrywide, which operates more than 50 agencies around the UK including Bairstow Eves, John D Wood and Hamptons International, said there had been a 29% plunge in the number of homes it sold in the capital in its most recent three months and warned that profits in the full year would be at the lower end of market expectations.
Its shares were the biggest loser in the FTSE-250 index, closing down 12.5% at 169p. The decline came after another knock, a day earlier, when the shares lost 5.3% as a result of the chancellor’s decision to ban letting agencies charging fees to tenants.
The poor trading update and fees ban have together wiped more than £75m off the value of the company this week and the shares are now worth less than half the 350p they were valued at when the business joined the stock market in 2013.
Countrywide blamed the decline in trading in the capital on fallout from the Brexit vote and changes to stamp duty.
The gloomy update came despite evidence of consumers’ resilience in the months following the referendum. Consumers continue to be the main driver of wider economic growth.
Jim Clarke, Countrywide’s finance director, said there was a big difference between people spending money on smaller, everyday items, and their willingness to commit to buying a new home.
“No one can really show them what the future is,” said Clarke. “There’s a real lack of clarity on what post-Brexit Britain looks like.”
Alison Platt, Countrywide’s chief executive, said there was nothing to suggest sales would pick up in the year ahead. “We don’t expect the market conditions for sales to change over the next year. We can’t see any catalyst for it. Taking this business forward is going to be about self-help. The market isn’t going to do us any favours.”
The outlook is weaker across the UK, according to Countrywide, but particularly in London. While the number of homes sold in London declined rapidly in the three months after the Brexit vote, the number of transactions across the rest of the country was down only 1%.
Group revenue in the third quarter fell by 4% to £188.5m.
Announcing the ban on letting fees on Wednesday the chancellor said the charges on tenants were unfair. “Landlords appoint letting agents and landlords should meet their fees. We will ban fees to tenants as soon as possible.”
News of the policy wiped millions off the value of Countrywide on Wednesday, along with others in the sector.
Platt said on Thursday that she looked forward to working with the government during the consultation process.
“As ever, the devil is always in the detail. Let’s be sure there are no unintended consequences here.”
The Association of Residential Letting Agents has warned that the policy could be counterproductive, because the costs would be passed on to landlords who would in turn raise rents to recoup the costs.
Countrywide said changes to stamp duty in the first quarter resulted in a larger-than-usual supply of rental properties, weighing on rental growth. In some areas, rents fell.
He said: “The company says it’s making good progress but today’s trading statement confirms that estate agents are facing a troubled future.
“Wednesday’s autumn statement bombshell banning letting agents from charging upfront fees to tenants couldn’t have come at a worse time for the sector. The trading statement presumably doesn’t take stock of this change so we could see a greater adverse effect as a result.”