Dominic Agace, Chief Executive, commented: “Winkworth emerged from lockdown with increased market share after rapidly adapting to the changed environment. As a result, in relative terms, our first half performance in sales was satisfactory and lettings and management proved solid. We have seen a spike in activity in the first two months of the second half and, if this carries through to the rest of the year, we hope to make up much of the ground lost in the second quarter. Our balance sheet continues to be strong and we are working hard to explore new opportunities for organic growth.”
Sales activity in Q1 2020 was brisk following the decisive General Election result in December 2019, with price declines reversed, supporting the view that pent-up demand was about to be released once the outcome for Brexit became clearer. This came to a sudden halt with the lockdown, with the property market being effectively put on pause for most of Q2. Although the majority of transactions were put on hold, fall-through rates continued to be in line with an industry average of 20 per cent, and where price renegotiations took place, these averaged around 3 per cent of the agreed price pre-lockdown.
The rentals and management side of the business was affected to a lesser extent with lettings income proving resilient as many tenants stayed put and renewals business increased. Property management continued to be active as landlords looked to agents to help them through difficult negotiations with tenants and find fair compromises with those with changed circumstances.
In H1 2020, gross revenues were £18.9m, down 11 per cent year on year. Sales income fell by 17 per cent to £8.2m, and Lettings and management declined by 7 per cent to £10.6m, representing a 55 per cent lettings and management/45 per cent sales income split across the business. The country rentals business grew by 8 per cent.
Total income from outer London markets, which represents 60 per cent of the business, fell by only 7 per cent, while with international clients leaving London and all but essential travel being banned, the central London business remained the most sensitive, with a 27 per cent reduction in income in H1.
The interim report highlights Winkworth’s continued focus on encouraging talented individuals and have backed one new franchisee in Tooting through equity participation. Other individuals with the potential to take on their own Winkworth businesses in H2 2020 and 2021 have also been identified.
Dominic Agace commented on the outlook for the rest of 2020: “Since the ending of lockdown, we have seen a significant uplift in activity in the sales market, with pent-up demand being combined with new movers entering the market, looking for a change in their living environment following enforced time at home. This has been further fuelled by the raising of the stamp duty threshold, and since the start of the second half, we have seen the highest weekly number of applicants in five years registering, viewing and agreeing sales.
"With the stamp duty cut remaining in place until March 2021, we anticipate that this surge in demand will be maintained through H2 2020. While we do not expect this to lead to higher prices, as increased demand is met by greater supply, we anticipate that the number of transactions will continue to be elevated. The change in taxation highlights the negative impact that increased stamp duty has had on the property market and its liquidity since the end of 2014.
"In rentals, we have seen increased supply outstripping demand, particularly in central London where restricted international movement has undermined tenant demand. While we anticipate seeing increased activity as the market catches up from lockdown, we expect this to be against a background of flat pricing overall as rents fall in prime London areas.
"Whilst the extent to which some of the exceptional trends will continue longer-term is not yet clear, in the absence of further Covid-19 restrictions we expect both sales and rentals activity to be positive for the remainder of the year."