London estate agent Foxtons (LSE:FOXT) warned that rents in the capital will continue to spiral despite a decline in property prices.
Foxtons, which is publicly listed in London, said it expects “the ongoing supply and demand imbalance” would drive rents, although the increases will “moderate” throughout the year, according to a statement.
House sales, however, are expected to slow as soaring interest rates force buyer demand lower, sending prices down.
Date from the Royal Institution of Chartered Surveyors (RICS) noted that falling house prices and a decline in buyer demand were having an adverse impact on the rental market.
“The rental market remains hugely constrained by the lack of stock,” said Simon Rubinsohn at the time, chief economist at RICS.
“Indeed, the consistency of the message from contributors to the survey about the shortfall of properties to rent and the impact this is having on rent levels is striking,”
Foxton’s forecast came as it reported 42% growth in profit in the first half thanks to growth in its lettings arm.
Julie Palmer, partner at corporate restructuring firm Begbies Traynor (AIM:BEG), believes that the imbalance between supply and demand of the rental market is unlikely to change in the near term.
“The shortage of rental properties means that finding somewhere to live is an ordeal for tenants, but it is a dream for London-focused estate agency Foxtons,” Palmer added.
“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.”
Shares in Foxton were up 3.6% to 39.3p.