Shares in estate agency group Countrywide have fallen hard, wiping its market capitalisation down to less than one-fifth that of Purplebricks.
Yesterday they tumbled for a second day running – at one point touching just 84p – with speculation that the cause was negative news about the housing market from the likes of Hometrack and mortgage lenders.
Countrywide’s market capitalisation fell to £225.8m, about 18% of Purplebricks.
Yesterday evening Purplebricks had a value of over £1.2bn or £1,258.31m – some five times that of Countrywide, the UK’s largest agent.
London-focused Foxtons, far smaller than Countrywide, had a market capitalisation of £190.1m.
Countrywide appears to be alone in the publicly quoted estate agency firms affected by the flow of negative news about the housing market.
These include stories in The Times which yesterday sparked a fall in shares in several house builders, with the suggestion that the Government could revoke planning permissions and developers could have paid far too much for land.
The paper yesterday began what it says is a series examining the housing market.
In one story, it is alleged that the prime minister is a Nimby who “just doesn’t understand the scale of the housing crisis”.
The story claims that “radical proposals” from housing secretary Sajid Javid and Chancellor Philip Hammond have been blocked.
The story centres on Tory fears that housing did more damage to them during the last election than tuition fees, because it is primarily younger voters who have been squeezed out of home ownership.
A second story – covered in EYE today – is about the increase in Stamp Duty receipts because the 3% surcharge now payable by buyers of second homes and buy-to-let properties has more than offset a fall in overall transactions.
The Times story quotes the RICS as saying that sellers are holding off because of economic uncertainty, and new buyers last year reached the peak of what they could afford.
A third story said that developers would lose planning permissions if they failed to hit construction targets. There would also be greater powers of compulsory purchase, with the possibility of land in future being acquired by councils for development at agricultural prices, with councils granting themselves planning permission. The implication of this is that developers would have over-paid for land that they have not yet build on.
The Times quotes housing analyst Anthony Codling of Jefferies, who warned of a dramatic drop in developers’ share prices.
Codling said: “If the Government were to implement a use or lose it rule or windfall tax retrospectively on all land that has got planning permission, you are talking Armageddon.
“Share prices are linked to the value of land that house-builders hold, so if you reduce the value of land, that has a direct effect.”
Sentiment on the stock market appeared to reflect this warning – although only partially. While drops in share prices seemed uniform, they were not major.
Builder Persimmon’s share price slipped 61p, while Barratts and Bovis each fell by around 2%, and Redrow was down by about 1.6%.
Meanwhile, Countrywide’s share price continued yesterday, slipping to 84.9p, according to the London Stock Exchange.
Countrywide has already issued a profits warning and parted company with its chief executive as the shares dived below 100p.
With further falls since then, the new executive team may have a tough job ahead in convincing the market about its recovery strategy – due to be revealed early next month.
* This morning Nationwide reported that house prices picked up in January, rising from £211,156 in December to £211,756. Economist Robert Gardner described the growth as “a little surprising” after mortgage approvals declined to their weakest level in three years at the end of last month.
But he added: “The flow of properties coming on to estate agents’ books has been more of a trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices.”