Foxtons warns on profit as London housing market cools

By Costas Pitas LONDON (Reuters) - British estate agent Foxtons warned profits would fall this year because of a marked slowdown in London's previously runaway property market, sending its shares tumbling by a fifth. Foxtons, which has become a symbol of the British capital's property boom, said sales volumes had fallen sharply and commissions were down in the third quarter. Sales had hit heir highest level since the 2008-09 financial crisis peak in the previous nine months. Known for its coffee shop-style offices and fleet of Mini Cooper cars bedecked with union flags, Foxtons said tougher lending rules and worries over British and European political stability had hit the market. After reporting a 3 percent dip in third quarter turnover and warning 2014 core earnings would also fall, investors wiped over 100 million pounds ($160 million) off the company's valuation in the biggest daily fall since Foxtons listed in September 2013. "We now believe that market volumes in the second half of 2014 overall will be significantly below levels during the same period last year," the company said. "The market is expected to continue to be constrained for some time." Prices for everything from sumptuous mansions to parking places have soared in the capital over the past two years. With one bedroom flats in central London now costing around half a million dollars, some have warned the market is overheating. Analysts at Jefferies said Thursday's figures showed the dangers of focusing a business around a single market. RIPPLE EFFECT Inflation in London's heady market is falling behind other parts of England as house-hunters who can no longer afford to live in the city look elsewhere, recent surveys indicate. London lost its top place as Britain's fastest growing market in October, according to according to property website Rightmove despite prices rising 7 percent to an average of 600,000 pounds($961,320), a new record. "The ripple effect of buyers priced out of London combined with those cashing in and moving out of the capital mean that the South East has taken London’s boom-town crown," Rightmove director Miles Shipside said in its monthly price index. Shares in Foxtons were down 17 percent at 169.5 pence at 1430 GMT, below the 230 price at which they were floated 13 months ago. In a further sign of how hard it is to borrow money for house purchases, British mortgage approvals also fell to the lowest level in just over a year, data showed on Thursday. The firm said its full-year adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) in 2014 would be lower than the 49.6 million pounds it reported last year. It said its commissions had fallen as the drop in sales volumes, which it expects to continue, offset the benefit of price increases. However, the summer period, which Thursday's figures cover, traditionally sees demand fall as many prospective buyers stop or limit their house hunting due to holidays. Chief Executive Nic Budden said that despite the sudden change in Britain's biggest housing market, the firm still planned to return more cash to shareholders. "Foxtons remains highly profitable, cash generative and debt free, and therefore well positioned to deliver further cash returns to shareholders," he said. (1 US dollar = 0.6241 British pound) (Reporting by Costas Pitas; Editing by Guy Faulconbridge/Keith Weir)