Chilly Autumn for Britain's Post-Brexit Property Businesses

By Art Patnaude

Some of Britain's property businesses are feeling a post-Brexit squeeze.

London-focused property broker Foxtons PLC said Wednesday that its sales dropped by over a third to GBP12.2 million ($15 million) between July and September, the three months following the U.K.'s vote to leave the European Union.

Meanwhile Travis Perkins, the U.K.'s largest building supplies retailer, said it was closing 30 branches and cutting 600 jobs, saying levels of future demand "remain difficult to predict." The company has added 4,000 staff this year and opened several new branches.

Property has been among the hardest-hit sectors after Brexit. In the weeks after the EU referendum, share prices of real-estate brokers and landlords plummeted, while property funds shut down trading as investors flocked to withdraw money.

That initial sense of panic has eased into the autumn. Share prices have rebounded and many real-estate funds have reopened.

But with uncertainty over how the U.K. government will shepherd the country through what are certain to be difficult negotiations with the other EU members, there is still caution over the impact Brexit will have on the market.

For Foxtons, problems have been well-flagged. In late June, just days after the EU referendum, the company announced that its 2016 earnings would be significantly lower than in 2015, because of Brexit. Its shares were temporarily suspended on the day, after steep falls.

The drop in third-quarter sales at Foxtons was expected on Wednesday, analysts said. Shares in Foxtons were up 3.2 % just before noon in London Wednesday, but down by nearly 50% this year.

"Maintaining guidance and ongoing cost control is supportive, but weakness in London property remains a key risk," said Heidi Richardson, research analyst at Swiss lender UBS, in a note.

Group revenue at Foxtons was down about 14% to GBP37.5 million in the third quarter, boosted by Foxtons' lettings business, which saw modest growth.

Part of the problems for property firms goes beyond Brexit, with the property market cooling across the country, even before the June vote.

Home prices in London's poshest neighborhoods--the market with which Foxtons is most readily associated--peaked in the summer of 2014 and have been falling steadily since. Government tax hikes and years of strong price gains turned off foreign investors who were also contending with market volatility and low oil prices.

With owners unwilling to sell at lower prices, and buyers uncertain about where prices will go from here, a standoff has seen trading drop. Renting homes in areas like Knightsbridge or Mayfair instead of buying has become increasingly popular.

The U.K. housing market started cooling after years of rising prices, making the lack of affordability one of the biggest discussion topics for Britons, from pubs to the halls of government.

Shares in Travis Perkins were down 7.2% just before noon in London Wednesday.

Write to Art Patnaude at art.patnaude@wsj.com

(END) Dow Jones Newswires

October 19, 2016 08:59 ET (12:59 GMT)

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