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UK estate agents: kings of their castles, but not forever

Property sector updates

British estate agents have had plenty of cheer this year. Winkworth, the latest to join the party, on Wednesday reported a doubling of sales in the interim period, over both year-ago and pre-pandemic numbers. Foxtons, its zippier rival, generated two-thirds more sales over the same period and registered a bump over 2019. Yet at some point sobriety looks set to return.

So far, however, more business means profits have returned. For Winkworth, pre-tax profit quadrupled to £2m. The small number reflects its franchise model, with income derived from an 8 per cent cut of franchisees’ takings.

Realtors are a notoriously upbeat lot. They see plenty of reason to toast their future. London rents, which provide a lead indicator of sorts, slumped by as much as a fifth during the pandemic. But with banks and other employers keen to usher workers back into the office, would-be tenants registering interest have jumped by a third on year-ago figures, says Winkworth.

Average UK house prices increased 13 per cent in the year to June, according to official figures. But London, where the average house costs £510,000, managed less than half that growth. An optimistic read is that a return to the capital by workers, students and investors, combined with short supply, will send prices higher in future. Recovery in the macro backdrop, including employment, and a possibly sustained desire for more space, also help.

Others will struggle to see too much sustainability in these trajectories. Much of the boom stems from government largesse, including the stamp duty holiday — a pandemic boost introduced in mid-2020. The phased removal of that prop has already dented homebuyer enthusiasm. Mortgage approvals, which rushed back to levels last seen before the financial crisis of 2008 after the levy was introduced, have begun tapering off.

The latest Bank of England data shows a 6 per cent drop from June to July. A more tempered second half beckons. The party hats may soon be removed.

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