BTDPY Barratt Development PLC (PK)

By Art Patnaude and Olga Cotaga 

LONDON--Shares in U.K. real-estate firms--from office landlords to property brokers and home builders--were hammered Monday after Britons last week voted to leave the European Union, a move analysts warned could cause property values to drop.

Foxtons Group PLC, a prominent property broker focused in London, warned that its 2016 earnings will be significantly lower than last year, suggesting an impending slowdown in housing deals. Foxtons shares fell as much as 24% in morning trading in London before being temporarily suspended.

Suspensions occur when a shares fall more than 10% from their closing price level on the previous day.

Shares in the biggest U.K. housebuilders were also temporarily suspended after steep losses, with Persimmon PLC down 23%. Other home builders, including Taylor Wimpey PLC, Barratt Developments PLC and Berkeley Group Holdings PLC, took big hits.

Land Securities PLC and British Land PLC, the two biggest listed U.K. landlords, also saw shares drop. Since the referendum results were announced Friday morning, Land Securities lost 24% of its value, while British Land shed 29%.

The sharp falls followed a broad expectation that U.K. real-estate values could drop, caused by transactions drying up amid uncertainty about how the U.K. will extricate itself from the EU.

In the run-up to the referendum, uncertainty over a possible Brexit vote had already hit the housing market throughout the U.K. Earlier this month, property brokers were predicting prices would fall this summer for the first time since 2012.

For housebuilders' earnings, a Brexit-inspired fall in consumer confidence, or if banks become less willing to lend, could be "very damaging," analysts at Swiss lender UBS Group AG said.

For landlords that own U.K. commercial real estate, values "now look likely to decline moderately over the remainder of the year," according to U.K. asset manager Aviva PLC.

Part of this could be driven by exodus of companies to Europe, led by financial services firms, which would have an outsize impact on London office market, analysts said.

Jefferies analysts estimate the U.K. capital could lose 100,000 jobs to Europe.

Like with commercial property in London, the housing market has a greater reliance on overseas buyers, making it especially susceptible to weaker sentiment from foreign investors.

"Areas which are more reliant on EU buyers, such as South Kensington and Angel, may well see a price correction," Robin Paterson, chief executive of U.K. Sotheby's International Realty, on Friday. He noted that prices in other areas could still perform well.

Transaction levels of high-end homes in central London had already been falling over the past year. Tax hikes, years of rising prices and Brexit uncertainty helped keep buyers at bay. Foreign investors from Asia and the Mideast were also contending with concerns over slowing global economic growth, weak oil prices and stock-market shocks.

Some analysts have noted that the sharp drop in the value of sterling against other currencies in the last few days could encourage bargain hunters from abroad. Pressure on the British pound intensified Monday after the currency closed at its lowest levels in more than 30 years on Friday.

"Buyers will expect a seriously good deal," said Roarie Scarisbrick, partner at buying agent Property Vision.

Transactions are a cornerstone for commission-lead brokers like Foxtons, which, like other brokers and analysts, had expected a boost to activity in the London housing market if Britons voted to remain in the EU.

"The upturn we were expecting during the second half of this year is now unlikely to materialize," Foxtons said in a statement. Challenging conditions "are now likely to continue for at least the remainder of the year."

Write to Art Patnaude at art.patnaude@wsj.com

(END) Dow Jones Newswires

June 27, 2016 12:09 ET (16:09 GMT)

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