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Property shares nosedive

property-shares-nosedive-thamesShare values across the property sector have dropped in recent days amid growing signs that the residential property market is slowing, especially in previously buoyant London and the South East.

Countrywide, the country’s largest estate agent, saw its shares drop by 2.9 per cent late last week, while Rightmove and Zoopla’s share prices fell by 3.7 per cent and 2.5 per cent respectively.

House builders also failed to escape unscathed from a raft of recent property reports and house price indices that suggest that it is fast becoming a buyer’s market as the market cools.

Developers listed on the FTSE 100, such as Taylor Wimpey, Persimmon and Barratt, all saw their share prices depreciate by more than 4 per cent at the end of last week, with further falls anticipated by some market analysts.

Stockbroker Jefferies, for instance, last week downgraded the entire residential property sector, projecting that London and the South East may see property price falls in the months ahead.

A research note from Anthony Codling, Jefferies’ property analyst, which was made public last week, suggested “share price weakness in the UK residential sector” in the first quarter, on the back of “negative newsflow on UK mortgage approvals, UK housing transactions, weak houseprice data and lower UK GDP growth.”

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“The weakness will continue into the second quarter because of uncertainty caused by the UK national election in May,” he added.

“We also believe that house price growth will slow significantly during the first half and may even decline in some parts of London and the South East, while there is uncertainty around the outcome of the election and the prospect of a new mansion tax should power change hands.”

Recent property price data released by the Land Registry, Halifax and Nationwide all reveal that home prices increased fairly strongly last year, but they are slowing, reflected by a fall in demand for mortgages, which fell sharply in the fourth quarter of last year, according to the Bank of England.

January 21, 2015

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