OnTheMarket warns on downside of frantic lets market

OnTheMarket says the frantic lettings market of the past year or more is bad news for agents.

In a trading statement to shareholders Jason Tebb, the portal group’s chief executive, says: “The lettings market is seeing a continuing but levelling decline in new rental instructions, pushing up average rents. Competition is fierce for lettings properties, but fewer new tenancies also negatively impacts agents, with a significant proportion of their monthly income resulting from new lets and the management of their clients' portfolios.”

The statement came in a mixed bag of results for the number three portal.

There was a 14 per cent rise in revenue, coming in at £34.4m; the ARPA or average revenue per advertiser - a key portal indicator - was up 12 per cent. The adjusted operating profit was up 59 per cent to £4.3m and the balance sheet showed year-end cash of £11.3m and no borrowings.

But although Tebb told shareholders that there had been a positive start to this current trading year he warned about the next period. 

“The macro-economic picture remains uncertain with mortgage affordability, stubborn inflation and the high cost of living all contributing to a slowdown in housing market activity through Q2 and an expectation of tougher trading conditions in second half of the year, which may have an impact on the Group. 

“Cancellations of agent contracts have been higher than expected; to negate this we continue to diversify our revenue streams with the ongoing rollout of additional products and services. The recent introduction of packages will provide even more additional value and mitigate product cancellations.

“The sales market is particularly challenging, with lower levels of new buyer activity as we move towards the second half of the year. In uncertain times, some active buyers may decide to 'wait and see'. This impacts levels of new sales agreed, reducing the value of the agents' under-offer sales pipelines. 

“The volatility in the mortgage markets in particular is having a negative effect on transaction numbers. Transactions, rather than average house prices, are the key metric for estate agents. Whilst it is too early to make any forecasts, there will undoubtedly be significantly fewer transactions this year than in the previous two years.”