A woman walks past a branch of Foxtons estate agents in central London yesterday.
LONDON: British property agent Foxtons enjoyed a strong stock market debut yesterday, seeing its stock rise well above its offer price in what could be seen as a vote of confidence in the housing market particularly in London where Foxtons is focused.
Shrugging off some concerns that its core property market might be overheating, the shares opened 19 percent above the 230 pence offer price — itself at the top of a targeted range between 190p and 230p — to value the company at around £775m ($1.2bn). By 1425 GMT they were trading at 271.5p.
Foxtons sold 60 percent of its equity to become the latest UK property-related company to float on the back of a recovering housing market, following real estate agency Countrywide and housebuilder Crest Nicholson earlier this year.
Both have seen their shares rise more than 50 percent since going public, but some investors said last week Foxtons was late to the party and too exposed to London.
While Britain’s housing market has been boosted by signs of an improving economy as well as help from the government and the Bank of England to ease access to finance, the pace of recovery has raised concerns about a new property bubble.
Data last week showed British house prices recorded their fastest rise in almost seven years.
However, despite being wary of proposed further government stimulus measures, house building analyst Tony Williams said London was not yet experiencing a market bubble and rising interest rates in coming years would act as a natural brake.
“A bubble is when you have people buying and flipping within the space of months. What you have in London is a shortage of supply and a planning system that gums up the works,” he said.
“This particular run will end some time between the back end of 2014 and 2016, as rising mortgage rates will cause the market to plateau,” Williams added.
Foxtons, which last year earned more than half its revenue from its lettings business, is focused on expansion within London, home to 40 of its 42 branches, and has said it is aiming for five to 10 new branch openings a year between 2014 and 2018.
But analyst Anthony Codling at brokerage Jefferies said that while estate agents were the best way to gain exposure to the UK housing market, prospects were better for nationwide firms.
“We see more significant potential for house price growth outside of London than inside,” he said in a note. Jefferies worked on Countrywide’s float.
House prices fell 16.3 percent in London after the financial crash and by 16.6 percent across England and Wales, according to Land Registry data. While London prices have recovered to 6 percent above their pre-crash peak, in the rest of the country they are still 10 percent below.
Foxtons’ offering, which was oversubscribed, raised 335 million pounds for selling shareholders, including majority owner private equity group BC Partners, and company employees.
Reuters
