A slowdown in the housing has made conditions more challenging than expected, says a major North East agency group.
LSL Property Services said its estate agency and finance services revenues were both down thanks to fewer house purchases and a smaller new build market. However, the Newcastle-based plc broadly maintained group revenues in the 10 months to the end of October at £276.1m, compared with £275.4m in the same period of 2021.
The business explicitly said the slowdown came after the Liz Truss Government's so-called 'mini Budget'. It pointed to a significant impact in its surveying and valuation business where lenders took time to assess the outlook and "reduced their appetite for new business".
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LSL also noted it had seen a trend towards re-mortgaging as borrowers looked to reduce monthly outgoings. However higher interest rates and more caution among lenders had squeezed the number of cases.
The volatile market conditions are not expected to continue into next year, according to LSL. The group expects second half profit to at least be broadly in line with 2021, with a possibility of a stronger performance.
David Stewart, chief executive, said: "As reported in our interim results, LSL traded strongly in the first half of the year, with our surveying and valuation and financial services businesses achieving record revenues. The estate agency division retained the substantial market share gains made in 2021, in doing so building a strong sales pipeline as significant profits were delayed by the continuing slow speed of exchanges across the market. This meant that the group entered the second half of 2022 well placed to deliver a strong H2 profit performance, ahead of the equivalent period in 2021.
"Since that time, market conditions have been more challenging than previously expected, with the mortgage and housing markets being disrupted by political uncertainty and sharply increasing interest rates. Across the market, this has given rise to a reduction in mortgage activity and new house sales, and an increase in fall-throughs of previously agreed sales.
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"This challenging background means that there is a wider range of potential outcomes for the full year than previously expected.
"I am pleased to confirm that LSL's performance has remained resilient, and we are confident that underlying group operating profit in the second half of 2022 will at least be broadly in line with the second half of 2021, with the possibility of a stronger performance depending on the volume of valuation instructions received from lenders. This includes additional costs incurred due to discretionary payments to over 2,000 colleagues to help alleviate the impact of significant increases in living costs. Around £0.6m of these costs will be reflected in 2022, with a further £0.8m to be paid in 2023 to cover the winter months."
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