Foxtons, which operates almost entirely in London, said waning consumer confidence against a backdrop of political uncertainty drove a 65% fall in pre-tax profits in 2017 to £6.5 million. That compares with £41m of profit just two years ago.
Foxtons said changes to rules in 2016, when the government imposed a new stamp duty surcharge on second homes, had also contributed to a weaker market and falling profits.
The tough year has resulted in Foxtons slashing its dividend payout to shareholders to 0.7p a share for 2017, down from 2p in 2016.
Nearly 30% of private households now rent their home in the capital, double the level of a decade ago, according to the estate agent.
However, new lettings arranged by the firm in 2017 were flat, while revenue within the division fell by 3% to £66 million as a result of lower rental rates in the market.
Foxtons said prices had been driven lower by an increase in the supply of rental properties, after buy-to-let landlords rushed to complete purchases before the stamp duty changes in April 2016.
Nic Budden, chief executive, said: “We are pleased to have delivered a performance in line with market expectations. However, sales activity in the London property market is near historic lows and this had a significant impact on our overall performance in 2017.
“Looking ahead, we expect trading conditions to remain challenging during 2018, and our current sales pipeline is below where it was this time last year.”
The company said London still has attractive long-term characteristics
Budden said its “brand strength, coverage and approach, position us well to manage through the current market uncertainties and take advantage of any future market recovery”.
He added that Foxtons is focused on growing its lettings business, but that it remains to be seen how harmful the planned ban on agency fees for tenants is likely to be.
Neil Wilson, an analyst at ETX Capital, said: “There is a clear rationale for saying that the hot flows of capital that flooded London property and pushed up the pound in the years prior to the Brexit vote have cooled and won’t be warming up any time soon.
“While ultimately this could be positive and create a more sustainable property market in London, investors in Foxtons may have to accept that the rampant price growth in the capital that drove shares in the good times, is a thing of the past,” Wilson said.
DealMakerz reckons the embattled estate agent is facing another challenging year in 2018.
Its focus on London has proved to be a major weakness as the market has cooled.
What’s more, it has had to cope with tough new competition from online agents like Purplebricks, which offers cash-strapped buyers cheaper sales fees.
With trading conditions set to remain tough this year, it’ll be interesting to see how Foxtons manages to weather the downturn.