London rents will keep rising even as property prices fall, top estate agent Foxtons says

London’s top estate agentFoxtons says rents in the capital will keep rising as the year goes on, albeit more slowly, even as property prices decline.

The estate agent expects lower sales for the rest of the year as interest rates soar, driving buyer demand down. It is optimistic that “demand may rebound strongly” next year if inflation keeps falling.

But for lettings, where Foxtons does most of its business, it said “the ongoing supply and demand imbalance” would drive rents, meaning prices will keep rising. The increases will “moderate” as the year goes on, however.

The forecast comes as Foxtons reported 42% profit growth for the first half of the year, thanks mostly to growth in its lettings arm as its sales business continued to deal with the fall-out from the mini-Budget. Shares are up by 1p to 39p.

Julie Palmer, partner at Begbies Traynor, said: “The shortage of rental properties means that finding somewhere to live is an ordeal for tenants but it’s a dream for Foxtons.

“With more than 27,000 rental properties on its books, Foxtons has shrugged off rising interest rates slowing the sales market, with the lettings business more than making up the difference.

“That’s something unlikely to change in the near term with the company noting that the imbalance between supply and demand of rental properties is at the highest level the agency has ever seen. The difficult market for home sales and rising costs means builders are cutting back on construction rates and the planning system remains as tied up in red tape as ever, so Foxtons’ future looks bright for years to come.

“Chief executive Guy Gittins was installed in the autumn with a remit to turn the business around and his focus on stable revenues – such as the rental market – is paying off. It means that Foxtons is insulated from a property sales market which is likely to be subdued for some time as buyers get used to mortgages at interest rates that were unimaginable a few years ago.”

The comments also come as mortgage prices appear to have reached their peak after dramatic rises in recent months.

According to Moneyfacts, the average two-year fixed residential mortgage rate fell back down to 6.83% after hitting a new high of 6.86% yesterday.

The average five-year rate also fell after hitting a new high yesterday, to 6.34%