Winkworth calls end to London property boom

Uncertainty surrounding May's General Election will stifle an already slowing housing market, Winkworth has warned, something flagged up at September's interims. But these concerns should at least support the estate agent's rental business next year and that a steady upward trend in transactions will emerge toward the end of next year.

Since this year's first-quarter spike, the housing market has cooled, which Winkworth blames on the upcoming election, stricter lending requirements as a result of the Mortgage Market Review, and the impact of the strong pound on international buyers.

"Uncertainty in the run up to the election has been most apparent at the top end of the market as a result of concerns over a mansion tax and new measures impacting overseas buyers," the company said on Tuesday.

Central London's slow-down is set to continue next year, with a 5% fall in house prices forecast for the first half, but an uptick at the second half could leave prices flat on 2014. And while Suburban London will also continue to slow as supply and demand is rebalanced, the South East will benefit from those in London relocating, with prices set to rise by 3% by the end of 2015. And delays to an interest rate rise should help buoy the middle market by keeping mortgage costs low. Although activity is set to be flat this year, next year should see an uptick.

But this challenging buying market should boost Winkworth's rental income, which already makes up over a third of its revenues, by 10%. Rental prices should rise further thanks to improving employment and wage inflation. This helps Winkworth reaffirm its full-year revenue expectations.

"We believe that we will be able to achieve stable performance for 2015 despite what may prove to be more difficult market conditions in the first half. If this prognosis proves correct, we will maintain our progressive dividend policy," the company added.

That was not enough to support Winkworth's share price, however, which has fallen back below 128p to a near-17-month low.

Westhouse Securities analyst Alastair Stewart warns that the estate agent's predictions could become a self-fulfilling prophesy.

"We would not rule out further incrementally weaker guidance in the months ahead from the firm and similar signals from rivals," he said. "It highlights our concerns about London transaction levels and pricing and, in our view, has negative readacross to London-centred developers and estate agents."

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