Foxtons has benefitted from the surge in rental values in recent months, helping to boost earning at the London-based estate agency, offsetting a slowdown in house sales in the first half of the year.

Foxtons posted pre-tax profits of £6.1m in the six months to the end of June, up from £4.3m a year earlier.

Lettings revenue was up 26% in the same period, offsetting a 19% drop in sales revenue caused in part by higher mortgage costs.

The agency, which has more than 27,000 tenancies, said on it expected rents to rise further in the coming months as demand continues to heavily outweigh supply in the PRS.

More people are actively looking to rent instead of by property as interest rates have risen, causing mortgage borrowing to surge.

“The continued growth in the imbalance between supply and demand is at the highest levels we have ever seen,” Foxtons said. “This continues to drive rents and is making it more difficult for renters to find affordable accommodation in London.”

Lettings made up 70% of Foxtons’ revenue in the first half of the year, compared with 61% in 2022.

Chief executive Guy Gittins said that the recurring revenues generated by lettings helped boost the agency’s revenue despite the challenging sales market.

“We are first and foremost a letting agency,” he said. “That has made us so much more resilient to these economic cycles.”

Foxtons has hired lettings negotiators since the start of the year, he added, while the agency was “in detailed discussions” to acquire “a strong pipeline of [lettings] businesses of varying sizes and varying locations” in and around London.

Foxtons said mortgage refinancing volumes rose 29% in the first half of 2023 and it expected the trend to continue throughout the year. But overall revenue at its financial services business dropped 12% as customers took smaller loans and made fewer new purchases.

Foxtons said that although it expected an increase in house sales in the third quarter, inflation and high borrowing costs would continue to hit transactions throughout the year.

Shares in the company rose more than 4% to a recent high of 39.3 pence.