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Falling Foxtons Profits Reflect London Turmoil

If you were looking for the archetypal corporate victim of the Brexit vote, Foxtons would come pretty well at the top of the list.

Profits at the estate agency tumbled to £10.5m in the first half of the year - a fall of 42% - with chief executive Nic Budden warning signs of recovery in London's residential property sales are not expected before the end of 2016.

Foxtons' fortunes are tied directly to the health of the capital's housing market which, in turn, depends very much on the health of the wider economy in the capital - particularly at the higher end.

That market has been plunged into a state of confusion following the referendum.

Until clarity emerges on the kind of relationship that the UK will have with the rest of the EU following Brexit, in particular whether the City's major players will continue to enjoy "passporting" rights into the EU's single market, there is likely to be a reluctance to hire new staff.

Many of those workers are talented people from the rest of the world, for whom the City has long been a magnet, although other London-based industries, such as architecture, the creative sector and the legal sector also employ vast numbers of well-paid foreigners.

These are the people who will now be trying to work out whether London is still somewhere that they wish to live and raise their families.

All of that is likely to dampen housing activity in London and bear down on prices.

To an extent, this had already been happening, thanks to changes in stamp duty introduced at the end of 2014 by George Osborne, the former chancellor.

His reforms cut the stamp duty bill for anyone buying a home worth less than £937,000 - but increased it for anyone buying a home worth more than that. Most of those properties were in London.

The big challenge for Foxtons, whose chief executive spoke today of the Brexit vote leaving the London housing market facing a "prolonged period of uncertainty", is how it negotiates this period

The company was looking to take its branch network to 100 outlets across the capital. That rate of expansion now looks to slow.

All is not lost for Foxtons. It is still the most admired operator in its field, renowned for getting the best prices for its clients, whom it charges a market-leading commission rate of 2.5%.

The collapse in the pound following the referendum may well encourage some wealthy overseas buyers to look again at the London market as it has effectively presented them with a price cut of 10%.

Expect Foxtons to exploit that opportunity to the fullest.