‘Significantly’ lower sales numbers to continue into 2017 – Countrywide

'Challenging environment' to push transaction levels even lower in 2017, as London exchanges slump by 29% compared to last Q3

“Transaction levels are currently running significantly below 2015,” says Britain’s biggest property services group Countrywide Plc in a pretty bleak trading statement, and this tough post-EU-referendum, high-SDLT “challenging environment” looks like it will continue into 2017.

2016’s transaction numbers are coming in at around 6% below 2015’s level, says the firm (which totted up £19bn worth of property sold in 2015), with London bearing the brunt (29% fewer exchanges took place here in Q3 compared to the same period a year earlier), and “it is likely that the level of market transactions in 2017 will be lower than 2016.”

The lettings sector is still dealing with fallout from the rush to beat the changes in stamp duty at the end of Q1, which pushed a glut of rental properties through to market. “Stock has increased more than tenant numbers,” notes Countrywide (properties under management have risen by 11% to 90,614, from 82,013 in 2015), “meaning more choice for tenants slowing rental growth, with rents falling in some areas.” Tenant numbers have, however, also nudged up a bit, picking up slack from the slowing sales market.

The firm inserted a deadpan response to yesterday’s surprise announcement of a ban on letting agency fees to tenants into its trading update, just saying that “we look forward to working with the Government through this consultation process.”

The sales slump and rental acceleration mean that total group revenue for Q3 dropped quite sharply from last year’s £197.1m to £188.5m this year, with revenue for the nine months to the end of September 2016 totalling £558.7m (down from £535.7m for the same period last year). 

Countrywide Plc’s KPI’s in Q3

Q3

2016

V Q3

2015

Sep YTD

2016

V Sep

2015

–      House exchanges (Retail)

13,409

-1%

39,207

+7%

–      House exchanges (London)

2,484

-29%

7,960

-11%

–      Residential lettings properties under management (Retail)

68,601

+14%

68,554

+15%

–      Residential lettings properties under management (London)

22,069

+1%

22,060

+4%

–      Number of mortgages arranged (Financial Services)

24,011

+19%

68,367

+30%

Playing the roll of silver lining, Countrywide’s “digital pilot”, which saw three high street brands go hybrid, is being touted as a triumph. A plan was announced in the summer to roll out the model to “around one quarter” of all Countrywide branches this year.

“Compared to the relevant control group, the pilot branches have recorded consistent outperformance in the period since launch to date across key measures”, says the firm. “What we have learned over the past few months has informed the development of the proposition going forward. The combination of our people, our high street presence and online technology is clearly differentiating. It is evident that our full service customers value the enhanced online tools that this proposition brings. We are now rolling out our digital proposition to the next wave of brands and branches as planned.”

Pilot v.

Control Group

–      number of leads

+4%

–      instructions

+15%

–      registered buyers

–      Average fee achieved (%)

+8%

No change

–      Online as a % of all instructions

3-4%

Q2’s low transaction level means that Countrywide’s 2016 EBITDA will be “around the lower end of market expectations,” with the “challenging environment” underlining “the importance of our focus on efficiency and productivity and the shift to our multi-channel model which we expect to yield significant benefit to our performance”.

Alison Platt, CEO: “We have made good progress this year despite tough market conditions since the EU referendum, particularly pleasing is our growth in market share in both Sales and Lettings based on available market data up to July. In addition, these results in our Lettings, Mortgage and Professional Service businesses underline the importance of the breadth of the group and the focus we have placed on keeping the customers we win and continuing to serve them. In light of the chancellor’s announcement yesterday regarding letting agents’ fees, we look forward to working with the Government through this consultation process. The results of our digital sales pilot and the roll out of Fixflo in Lettings signal strong steps towards building our multi-channel network across the UK. Our work to ensure we have fewer, better brands and branches continues at pace.”