UK estate agent Winkworth has warned profits will fall short of forecasts because of a slump in sales, sending shares in the group down 15 per cent in early trading.
Rising mortgage rates pushed sales down 20 per cent compared with the first half of last year, Winkworth said. As a result, profits for this year were expected to “fall below market expectations”.
UK mortgage rates have risen as the Bank of England has increased interest rates to try to bring down stubbornly high inflation. The average cost of a two-year fixed mortgage is now higher than it was after the UK’s disastrous “mini” Budget in September.
Winkworth said mortgage approvals rose in the first quarter but were now below levels recorded in the first half of last year. Chief executive Dominic Agace said sales applications had also fallen since the Bank of England raised rates by a surprise half percentage point to 5 per cent at the end of June.
The group said that a high number of agreed sales had been put on hold and that transactions at all stages had slowed. Halifax reported last week that UK house prices were 2.6 per cent lower this June compared with a year earlier.
“There has been a drop off in sales applicants which is not surprising,” said Agace. “There is a lack of confidence . . . people slow down on what they do.”
He added that uncertainty about inflation and interest rates was weighing on the market.
“Property needs certainty, uncertainty is bad for transactions,” he said. “What we are waiting for is a bit more certainty on inflation data and consensus on predictions.”
The weakness in the sales market overshadowed a better performance by Winkworth’s lettings business, which benefited as rising mortgage costs forced more potential buyers to rent. Lettings revenue was 11 per cent higher in the first half of the year and represented around half of total revenue.
Agace said a shortages of rental properties and rising rents had been a trend for the past couple of years.
“While the directors believe that confidence will return once buyers can access a broader choice of mortgage finance, the outlook for sales in the second half of the year remains uncertain,” the company said on Wednesday.
Winkworth said its preliminary results for the first half of the year indicated an overall 6 per cent fall in gross income.
The estate agent, established in Mayfair in 1835, has more than 100 franchises concentrated in London and south-east England.
London was the least affordable region for buying a property last year, according to the UK’s Office for National Statistics, with the average buyer spending 12.5 times their annual earnings on the purchase.
Winkworth said it would pay its shareholders a 2.9p per share dividend for the second quarter.
This article has been updated to say that lettings revenue rose 11 per cent, not 20 per cent.