After decisive British election, estate agents draw up listing plans
After a general election that removed much uncertainty from the nation's housing market, backers look to list their companies
The investors behind a handful of British estate agents are looking to take their companies public, encouraged by the strong performance of European property stocks and a national election that removed much of the uncertainty from the housing market.
Purplebricks and easyProperty are seeking to harness demand from funds with limited tools for tapping into a thriving residential property market.
With equity markets strong and house prices still on the up, these new kids on the block offer a less risky way into Britain's £5.75 trillion (HK$68.1 trillion) residential property market than speculating on bricks and mortar, fund managers said.
Next year, about 1.3 million houses are expected to change hands in Britain, up from 1.18 million last year, according to property services company JLL.
The Conservative Party's unexpectedly decisive victory in the May 7 national election has added impetus to a market that was already forecast to improve on the back of low mortgage rates and economic growth.
The opposition Labour Party, neck-and-neck with the Conservatives in pre-election polls, had pledged measures which could have cooled demand, including an annual tax on high-value properties.
"Housing volumes should pick up quite materially from here on, now that people have clarity on who's going to be governing us for the next five years or so," said Jamie Forbes-Wilson, who runs the AXA Framlington Blue Chip Equity fund.
Relative to some European markets, there are few listed companies in Britain that provide investors with the kind of exposure to housing offered by the likes of Germany's Deutsche Annington and Deutsche Wohnen.
Looking to fill this gap are companies such as Hunters, Britain's sixth-largest estate agent, and easyProperty, the online letting agent co-founded by businessman Stelios Haji-Ioannou which plans a share placement or IPO this year.
Spain offers a glimpse of the potential. Shares of Merlin Properties have risen 19 per cent and Axia Real Estate 13.3 per cent since each company listed last year, as of May 27, to snap up cheap assets after a six-year property slump.
Asked whether he would put money into British offerings, Patrick Brophy, portfolio manager at Janus Global Real Estate Fund, said: "Absolutely, we'd be interested."
Purplebricks, backed by fund manager Neil Woodford, plans its listing next year and has hired Canaccord Genuity as adviser.
Like other online estate agents, it aims to win customers by providing services at a fraction of the cost on the high street.
"[An IPO] will give us a high profile and high credibility across the UK," said non-executive director Paul Pindar, former chief executive of outsourcing group Capita and owner of about 5 per cent of Purplebricks.
With much lower overheads, online estate agents enjoy an advantage over their high-street rivals, some investors said.
"The cyclical nature of the sector would point me more towards the technology-type companies rather than the traditional brick-and-mortar ones," said Wilson. "You don't want a big fixed-cost base when things go wrong."
Valuations also compare favourably. Popular property websites Rightmove and Zoopla Property Group trade on enterprise value to earnings before interest, tax, depreciation and amortisation multiples of 25 and 21 respectively - about double that of traditional estate agents.
Simon Hampton, head of real estate deals at PricewaterhouseCoopers, said online agencies could expect a similar advantage.